FINRA Loosens Rules: Brokers Can Now Woo More Investors in Private Deals
Published Date: 2/13/2026
Notice
Summary
FINRA just updated the rules for Capital Acquisition Brokers (CABs), letting them work with more types of investors and handle private company control changes. These changes also clarify how CABs get paid and let their team join private securities deals under certain rules. The new rules kick in soon, making it easier and clearer for CABs to connect buyers and sellers of unregistered securities.
Analyzed Economic Effects
6 provisions identified: 5 benefits, 0 costs, 1 mixed.
CABs Can Serve Both Sides in M&A Deals
FINRA updated CAB rules to allow CABs to qualify, identify, solicit, or act as placement agents or finders in connection with a change of control of a privately held company on behalf of either buyer or seller, and to represent both sides if they provide clear written disclosure and obtain written consent. The rule defines "control" consistent with the M&A Brokers Exemption and presumes control after the transaction if a buyer or group has the right to vote or sell 25% or more of a class of voting securities or contributed 25% or more of the capital.
Employees Added to ‘Institutional Investor’
FINRA expanded the CAB Rules to add certain "eligible employees" to the definition of "institutional investor," including Knowledgeable Employees under Investment Company Act Rule 3c-5 and specified officers, directors, and similar policy-making persons. The SEC approved these amendments in an order dated February 10, 2026, so these eligible employees may be treated as institutional investors for CAB private-placement activities.
Associated Persons Can Do Private Deals
FINRA removed the CAB Rule prohibition that previously barred associated persons of CABs from participating in private securities transactions; instead such persons may participate subject to FINRA Rule 3280's notice, approval, and supervision requirements. Firms that approve such participation must record and supervise these transactions as if executed on behalf of the firm.
CABs May Take Equity as Compensation
FINRA codified prior guidance to permit a CAB to receive equity securities of a privately held issuer as compensation for CAB services, provided the receipt, exercise, or sale of such securities will not cause the CAB to engage in activities prohibited under CAB Rule 016(c)(2). The Commission approved this codification in its February 10, 2026 order.
CABs May Represent Institutional Buyers
FINRA amended the CAB Rules to allow CABs to act not only for issuers but also for institutional investor buyers in sales of newly issued, unregistered securities. The Commission approved this amendment on February 10, 2026, expanding the parties a CAB can represent in primary private-placement transactions.
Secondary Trades Between Institutions Allowed
FINRA broadened CAB participation in secondary transactions: CABs may act as placement agents or finders for secondary sales or purchases of unregistered securities provided both buyer and seller are institutional investors and the sale qualifies for a Securities Act registration exemption. The Commission issued the approving order on February 10, 2026.
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