Issuers

This section covers the definition of an issuer under the Uniform Securities Act (USA), issuer versus non-issuer transactions, registration of issuer agents, and the role of finders.

Definition of Issuer (USA Section 401(h))

An issuer is any person who issues or proposes to issue any security.

  • For certificates of deposit, voting-trust certificates, or collateral-trust certificates, the issuer is the person performing the acts of depositor or manager
  • For oil, gas, or mining certificates of interest or participation, there is no issuer (these interests have no identifiable issuer under the USA)

Non-Issuer Transactions (USA Section 401(i))

A non-issuer transaction is a transaction not directly or indirectly for the benefit of the issuer.

  • Non-issuer transactions are secondary market sales where the issuer does not receive proceeds
  • Issuer transactions are primary distributions where the issuer receives the proceeds

Exam Tip: Gotchas

  • A transaction is an "issuer transaction" if the issuer benefits, even indirectly. An officer selling personal shares is a non-issuer transaction. A company selling treasury stock is an issuer transaction because the company receives the proceeds.

Registration of Issuer Agents

An agent of an issuer must register in the state unless an exclusion applies (USA Section 401(b)).

Exclusions from Agent Registration for Issuer Representatives

A person representing an issuer does NOT need to register as an agent when:

  • Effecting transactions in exempt securities (402(a)(1), (2), (3), (10), or (11))
  • Effecting exempt transactions (402(b))
  • Effecting transactions in federal covered securities under Securities Act (SA) 18(b)(3) and 18(b)(4)(D)
  • Effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid for soliciting

Exam Tip: Gotchas

  • An issuer's employee selling the company's securities to the public in a non-exempt transaction MUST register as an agent. The "employee" exclusion only applies to sales to OTHER employees of the same issuer, with no commission paid.
  • A person representing an issuer in an exempt transaction does not need to register as an agent. But a person representing a broker-dealer in the same exempt transaction DOES need to be registered (the exclusion only applies to issuer representatives).

Finders

A finder is a person who introduces potential investors to an issuer, typically in private placements. Finders are NOT employed by the issuer; they receive a fee for introductions.

Registration Analysis

  • Under the USA, if a finder's activities go beyond mere introductions (e.g., negotiating deal terms, providing investment advice, handling funds), the finder may be required to register as a broker-dealer or agent
  • The key question: does the finder's compensation and level of involvement constitute "effecting transactions in securities"?
  • A finder who receives transaction-based compensation (a percentage of the amount invested) is more likely to be deemed a broker-dealer than one who receives a flat fee
  • Transaction-based compensation is a hallmark of broker-dealer activity

Exam Tip: Gotchas

  • Transaction-based compensation for a finder = almost always required to register as a broker-dealer (BD) or agent. A flat fee is less likely to trigger registration but is still viewed skeptically by regulators.