We have updated this post! We are leaving this post up as to not disturb any saved links; however, please visit our more recent post, Registering as a Capital Acquisition Broker (CAB), for current information on the topic.
FINRA recently made an announcement that should be considered great news for firms involved in mergers and acquisitions. FINRA is proposing to create a separate rule set that would apply to firms that meet the definition of a “capital acquisition broker” (“CAB”) and elect to be governed under this rule set. The proposed rule will help in reducing some of the overall work load and regulatory burden for firms that are governed under this rule set.
Under the new set of rules for Capital Acquisition Brokers, there are several rules and sections of certain rules that would no longer apply to these firms (e.g. ACM, conflicts of interest re: supervisors activities, conducting internal inspections, CEO 3130 certification, auto 2 year AML testing requirement, among others).education results news
The following is an executive summary of the proposal from the Federal Register:
There are FINRA registered broker-dealers that are solely corporate financing firms that advise companies on mergers and acquisitions, advise issuers on raising debt and equity capital in private placements with institutional investors, or provide advisory services on a consulting basis to companies that need assistance analyzing their strategic and financial alternatives. These firms often are registered as broker-dealers because of their activities and because they may receive transaction-based compensation as part of their services.
Nevertheless, these firms do not engage in many of the types of activities typically associated with traditional broker-dealers. For example, these firms typically do not carry or act as an introducing broker with respect to customer accounts, handle customer funds or securities, accept orders to purchase or sell securities either as principal or agent for the customer, exercise investment discretion on behalf of any customer, or engage in proprietary trading of securities or market-making activities.
FINRA is proposing to establish a separate rule set that would apply exclusively to firms that meet the definition of capital acquisition broker and that elect to be governed under this rule set. Capital Acquisition Brokers would be subject to the FINRA By-Laws, as well as core FINRA rules that FINRA believes should apply to all firms. The rule set would include other FINRA rules that are tailored to address Capital Acquisition Brokers’ business activities.
For more information on this proposal, click here.