Broker Rules Get Update: SEC Decides on Unregistered Securities Sales
Published Date: 9/16/2025
Notice
Summary
FINRA wants to update its rules so Capital Acquisition Brokers (CABs) can help sell new unregistered securities to more types of investors and even assist institutional investors selling their own unregistered securities. They also want to clarify how CABs get paid and allow certain private deals under clear rules. The SEC is now deciding if these changes are good to go, with a decision expected by September 12, 2025.
Analyzed Economic Effects
5 provisions identified: 5 benefits, 0 costs, 0 mixed.
CABs May Act for Institutional Sellers in Secondary Private Sales
The proposal would permit CABs to qualify, identify, solicit, or act as placement agents or finders on behalf of an institutional investor that seeks to sell unregistered securities it owns, provided the purchaser is an institutional investor and the sale qualifies for an exemption from registration under the Securities Act (proposed CAB Rule 016(c)(1)(H)).
CABs May Sell New Unregistered Securities to More Employees
The proposed rule would let FINRA Capital Acquisition Brokers (CABs) qualify, identify, solicit, or act as placement agents or finders for sales of newly issued unregistered securities to an expanded set of investors that includes certain "eligible employees" as defined in proposed CAB Rules 016(i)(8) and 016(m). The change is part of FINRA's SR-FINRA-2025-005 filing submitted June 4, 2025 and is under SEC review.
CAB Associated Persons Allowed in Private Securities Deals
The proposed rule would remove the CAB-specific prohibition in CAB Rule 328 and permit associated persons of CABs to participate in private securities transactions to the same extent as associated persons of non-CAB FINRA member firms, subject to FINRA Rule 3280's notice, approval, and supervision requirements.
CABs Can Be Paid with Equity Securities
The proposed rule would codify prior FINRA guidance by permitting a CAB to receive compensation in the form of equity securities of a privately held issuer for services permitted under CAB Rule 016(c)(1), provided that receipt, exercise, or sale of those securities would not cause the CAB to engage in activities prohibited under CAB Rule 016(c)(2) (proposed CAB Rule 511).
M&A Broker Exemption Referenced to New Statutory Provision
The proposed amendment would revise CAB Rule 016(c)(1)(G) to reference Section 15(b)(13) of the Exchange Act (the new statutory registration exemption for M&A Brokers) or any SEC rule, release, interpretation, or no-action letter that permits materially similar activities, rather than relying on a withdrawn SEC staff no-action letter.
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