A person who effects securities transactions for the account of others must generally be registered as a broker. Compensation tied to a transaction is the principal indicator.

Factors indicating broker activity. Transaction-based compensation; solicitation of investors; participation in negotiations; advice about the merits; handling of funds or securities; and prior involvement in sales.

Transaction-based compensation is the most heavily weighted factor and is what converts an introduction into brokerage.

The finder question. There is no general finder exemption at federal level. Some states permit limited finder activity with registration, and proposals for a federal exemption have not been adopted.

Issuer exemption. Officers and employees of the issuer may sell its securities without registering if they meet conditions including that they are not compensated by commission and are not associated with a broker-dealer.

Consequences. Rescission rights for investors, unenforceability of the fee agreement, disgorgement, and regulatory action against the issuer for aiding a violation.

Practical guidance. Use a registered placement agent, or compensate on a flat or hourly basis with no transaction linkage, and document the arrangement before the introduction rather than after the round closes.