Finders vs Broker Dealers

Though Finders and Brokers carry out many of the similar operations and have almost same responsibilities, but they are entirely poles apart from each other. Many of the companies appoint finders to assist them in finding right qualified investors for the ventures. Unlike broker-dealers, finders only correspond to the deal rather than any party. On the other hand, broker-dealers are the legal agents representing either of the party in the deal.

Finders: Unlike brokers-dealers, finders are exempt to have a registration from the Federal or Central securities law commissions. Only reason for this exemption is that they do not have control and rights to effect the transaction of the deal. To differentiate themselves from brokers, finders must have to draw a sleek margin on their roles and activities performed during the deal. Finders should solely focus on increasing PR and upgrading contact lists, then introducing venture seekers to the potential qualified investors. Finders may receive their commission or fee from both parties or by either any one party.

Brokers: Broker-dealers are capable of effecting securities and its transactions on behalf of their respective parties. For this authority, they are obliged to get a license from securities regulatory commissions and authorities of certain countries or states, they are operating in. They are deeply involved in negotiating and facilitating securities and its terms and policies during the entire process. Brokers-dealers normally get pre-defined commission or fee from their respective parties.

There are some activities listed below, identified by the regulatory authorities which are legal for registered broker-dealers, but might drag unregistered finders to the court:

  1. To negotiate in the terms of deal transactions.
  2. To give offer, advice or suggestion in the deal transactions.
  3. To request success-based fees or commission.
  4. To provide assistance of drafting or sales distribution to the issuer.
  5. To solicit investors.
  6. To manage or store funds of the transactions.
  7. To have prior involvement in the sale of securities.

All the activities described above should be avoided by the finders to differentiate themselves from the broker-dealers. If finder finds himself to be engaged in the above mentioned practices, it is suitable for the finder to get associated with the registered broker-dealers.