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Capital Acquisition Broker Rules
010. GENERAL STANDARDS
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This version of the rule (or interpretive material) does not become effective until Apr 14 2017.
When used in the Capital Acquisition Broker Rules, unless the context otherwise requires:
(a) "Associated person of a capital acquisition broker" or "person associated with a capital acquisition broker"
The term "associated person of a capital acquisition broker" or "person associated with a capital acquisition broker" means: (1) a natural person who is registered or has applied for registration under the FINRA rules; (2) a sole proprietor, partner, officer, director or branch manager of a capital acquisition broker, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a capital acquisition broker, whether or not any such person is registered or exempt from registration with FINRA under the FINRA By-Laws or the FINRA rules; and (3) for purposes of FINRA Rule 8210, any other person listed in Schedule A of Form BD of a capital acquisition broker.
The term "By-Laws" means the By-Laws of the Corporation or the FINRA By- Laws.
(c) "Capital Acquisition Broker"
(1) A "capital acquisition broker" is any broker that solely engages in any one or more of the following activities:
(A) advising an issuer, including a private fund, concerning its securities offerings or other capital raising activities;
(B) advising a company regarding its purchase or sale of a business or assets or regarding its corporate restructuring, including a going-private transaction, divestiture or merger;
(C) advising a company regarding its selection of an investment banker;
(D) assisting in the preparation of offering materials on behalf of an issuer;
(E) providing fairness opinions, valuation services, expert testimony, litigation support, and negotiation and structuring services;
(F) qualifying, identifying, soliciting, or acting as a placement agent or finder (i) on behalf of an issuer in connection with a sale of newly-issued, unregistered securities to institutional investors or (ii) on behalf of an issuer or a control person in connection with a change of control of a privately-held company. For purposes of this subparagraph, a “control person” is a person who has the power to direct the management or policies of a company through ownership of securities, by contract, or otherwise. Control will be presumed to exist if, before the transaction, the person has the right to vote or the power to sell or direct the sale of 25% or more of a class of voting securities or in the case of a partnership or limited liability company has the right to receive upon dissolution or has contributed 25% or more of the capital. For purposes of this subparagraph, a “privately-held company” is a company that does not have any class of securities registered, or required to be registered, with the Securities and Exchange Commission under Section 12 of the Exchange Act or with respect to which the company files, or is required to file, periodic information, documents, or reports under Section 15(d) of the Exchange Act; and
(G) effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company, in accordance with the terms and conditions of an SEC rule, release, interpretation or "no-action" letter that permits a person to engage in such activities without having to register as a broker or dealer pursuant to Section 15(b) of the Exchange Act.
(2) "Capital acquisition broker" does not include any broker or dealer that carries or acts as an introducing broker with respect to customer accounts, holds or handles customers' funds or securities, accepts orders from customers to purchase or sell securities either as principal or as agent for the customer (except as permitted by paragraphs (c)(1)(F) and (G)), has investment discretion on behalf of any customer, engages in proprietary trading of securities or market-making activities, or participates in or maintains an online platform in connection with offerings of unregistered securities pursuant to Regulation Crowdfunding or Regulation A under the Securities Act of 1933, or effects securities transactions that would require the broker or dealer to report the transaction under the FINRA Rules 6300 Series, 6400 Series, 6500 Series, 6600 Series, 6700 Series, 7300 Series or 7400 Series.
(d) "Capital Acquisition Broker Rules"
The term "Capital Acquisition Broker Rules" means Capital Acquisition Broker Rules 010 through 1000.
The term "Commission" means the Securities and Exchange Commission.
The term "customer" shall not include a broker or dealer.
(g) "Exchange Act" or "SEA"
The term "Exchange Act" or "SEA" means the Securities Exchange Act of 1934, as amended.
The term "FINRA" means, collectively, FINRA, Inc., FINRA Regulation, Inc. and FINRA Dispute Resolution, Inc.
(i) "Institutional Investor"
The term "institutional investor" means any:
(1) bank, savings and loan association, insurance company or registered investment company;
(2) governmental entity or subdivision thereof;
(3) employee benefit plan, or multiple employee benefit plans offered to employees of the same employer, that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and in the aggregate have at least 100 participants, but does not include any participant of such plans;
(4) qualified plan, as defined in Section 3(a)(12)(C) of the Exchange Act, or multiple qualified plans offered to employees of the same employer, that in the aggregate have at least 100 participants, but does not include any participant of such plans;
(5) other person (whether a natural person, corporation, partnership, trust, family office or otherwise) with total assets of at least $50 million;
(6) person meeting the definition of "qualified purchaser" as that term is defined in Section 2(a)(51) of the Investment Company Act of 1940; and
(7) any person acting solely on behalf of any such institutional investor.
The term "Member" means any individual, partnership, corporation or other legal entity admitted to membership in FINRA under the provisions of Articles III and IV of the FINRA By-Laws.
The term "person" includes any natural person, partnership, corporation, association, or other legal entity.
(l) "Securities Act"
The term "Securities Act" means the Securities Act of 1933, as amended.
Adopted by SR-FINRA-2015-054.
Selected Notice: 16-37.