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Broker Dealer for California


The Securities Act of 1934 has been significantly changed for the first time in 80 years. The SEC issued a NAL, no action letter, to allow unlicensed professionals to receive commissions on the sale of privately held securities in a sales transaction. Prior to the NAL, only a FINRA (financial industry regulatory authority) registered member of a Broker-Dealer (BD) could participate in the sales transaction commission. And, referral fees for non-licensed persons were prohibited.

The NAL provides guidance as to what transactions are allowed. Sellers must be private and the buyers must assume active control and operations of the business. Control is defined as 25% or more of the voting rights. Operational activity includes the power to elect executives and approve annual budgets. In addition to the NAL, the Senate is reviewing legislation that would actually amend the Securities Act of 1934.

In California, it may be a very different story for non-licensed persons to participate. The current state law passed in 2006 mandates that only FINRA licensed representatives of a BD may sell securities. It remains to be seen if California will revise its law to align with the NAL or Federal law, when passed. California is often at odds with other Federal Laws.