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JOBS Act Interpretation Of Securities Broker-Dealer Exemption

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Most people are familiar with JOBS Act in connection with crowdfunding. However this document also has sections related to other topics, particularly "Access To Capital For Jobs Creators". Not being a securities lawyer it's hard for me to fully understand the upcoming changes. My feeling is that it should ease securities broker-dealer requirements for being able to perform small services related to connecting investors with investment opportunities.

What is your interpretation of this portion of JOBS Act (H.R. 3606)? My feeling is that it will allow in some cases to offer intermediary services to investors without current requirement of being registered as securities broker-dealer. Here is the excerpt.

‘‘(b)(1) With respect to securities offered and sold in compliance
with Rule 506 of Regulation D under this Act, no person who
meets the conditions set forth in paragraph (2) shall be subject
to registration as a broker or dealer pursuant to section 15(a)(1)
of this title, solely because—


‘‘(A) that person maintains a platform or mechanism
that permits the offer, sale, purchase, or negotiation of
or with respect to securities, or permits general solicitations,
general advertisements, or similar or related activities
by issuers of such securities, whether online, in person,
or through any other means;
‘‘(B) that person or any person associated with that
person co-invests in such securities; or
‘‘(C) that person or any person associated with that
person provides ancillary services with respect to such securities.
‘‘(2) The exemption provided in paragraph (1) shall apply to
any person described in such paragraph if—
‘‘(A) such person and each person associated with that
person receives no compensation in connection with the purchase
or sale of such security;
‘‘(B) such person and each person associated with that
person does not have possession of customer funds or securities
in connection with the purchase or sale of such security; and
‘‘(C) such person is not subject to a statutory disqualification
as defined in section 3(a)(39) of this title and does not
have any person associated with that person subject to such
a statutory disqualification.
‘‘(3) For the purposes of this subsection, the term ‘ancillary
services’ means—
‘‘(A) the provision of due diligence services, in connection
with the offer, sale, purchase, or negotiation of such security,
so long as such services do not include, for separate compensation,
investment advice or recommendations to issuers or investors;
and
‘‘(B) the provision of standardized documents to the issuers
and investors, so long as such person or entity does not negotiate
the terms of the issuance for and on behalf of third
parties and issuers are not required to use the standardized
documents as a condition of using the service.’’.

If you'd like to learn more, review full draft of the JOBS Act.

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Guest Sunday, 25 June 2017