Not everyone involved in an investment transaction is an agent requiring registration. The activities requiring registration as an agent or broker is found in statute, common law and regulatory opinions. Although no single factor has been identified by these authorities to determine whether someone engaged in a financial transaction requires registration, factors given weight have been; whether the individual was involved in negotiations, solicited the investors, discussed the details of the investment, and if the person received compensation on a transaction-related basis.
Although Missouri has not statutorily or through administrative rulemaking defined those activities, there is guidance at the federal level from SEC No Action Letters and common law. In SEC v. U.S. Pension Trust Corp., No. 07-22570-CIV, 2009 WL 2365702 (S.D. Fla. July 30, 2009), the district court looked at several factors to determine whether a person’s activities were outside of the activities requiring registration as a broker. These factors include whether the person: (1) actively solicited investors; (2) advised investors as to the merits of an investment; (3) acted with “certain regularity of participation in securities transactions; and (4) received commissions or transaction based remuneration. U.S. Pension Trust, 2009 WL 2365702 at *9.
Two states provide a registration process for persons who participate in the offer or sale of securities who are not agents or brokers, Texas and Michigan. In Michigan these persons are “finders” and are defined as a person who, for consideration, participates in the offer to sell, sale, or purchase of securities or commodities by locating, introducing, or referring potential purchasers or sellers. Section 451.801, RSMi (Cum. Supp. 2008). Finders are included in the definition of investment adviser in the Michigan Securities Act and must register as such. In Texas, finders are defined as “An individual who receives compensation for introducing an accredited investor to an issuer or an issuer to an accredited investor solely for the purpose of a potential investment in the securities of the issuer, but does not participate in negotiating any of the terms of an investment and does not give advice to any such parties regarding the advantages or disadvantages of entering into an investment, and conducts this activity in accordance with §115.11 of this title (relating to Activities of a Finder). Note that an individual registered as a finder is not permitted to register in any other capacity; however, a registered general dealer is allowed to engage in finder activity without separate registration as a finder.” TX 7 CSR 7-115.1. Texas provides a registration process for finders.
The Missouri Securities Act contains exemptions for agent registration. The Act defines an agent in Section 409.1-102(1), RSMo, (Cum. Supp. 2008), as “an individual other than a broker-dealer, who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or represents an issuer in effecting or attempting to effect purchases or sales of the issuer’s securities.” Section 409.4-402. (a), RSMo (Cum. Supp. 2008), the registration provision for agents of broker-dealers in the Missouri Securities Act reads: “It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this act as an agent or is exempt from registration as an agent under subsection (b).”
The Missouri Securities Act’s exemption provision for agent registration found in Section 409.4-402(b) RSMo. (Cum. Supp. 2008), specifically provides in subdivision Section 409.4-402(b)(3), “an individual who represents an issuer with respect to an offer or sale of the issuer's own securities or those of the issuer’s parent or any of the issuer's subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities.” Moreover, subdivision (8) provides: “an individual who represents an issuer and who restricts participation to performing clerical or ministerial acts is exempt from registration.”
The prudent course of action is to evaluate your status and conduct and consult with counsel or your state regulator before you engage in any securities transaction as an unregistered person.
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