Waterview Securities, Inc. Comment On Regulatory Notice 25-06
Larry Starks
Waterview Securities, Inc.
A.1 Should CABs be permitted to engage in a broader range of M&A and private placement activities than currently specified in the CAB rules?
Answer: Probably not.
A.2 CABs may not act as an agent for secondary transactions involving unregistered securities, other than in connection with the change of control of a privately held company. Should CABs be permitted to act as placement agents in connection with other types of secondary transactions involving unregistered securities?
Answer: No comment
A.3 CABs may act as an agent in connection with the sale of newly issued unregistered securities only to institutional investors, which does not include individual investors unless they own $5 million or more in investments.12 Should CABs be permitted to sell newly issued unregistered securities to less wealthy accredited investors that do not meet the $5 million threshold?
Answer: Yes
A.4 Are there any other aspects of the CAB rules that FINRA should modify that would further facilitate capital formation while protecting investors, and to better coordinate with the exemptions enacted by Congress and proposed by the SEC? For example, should CABs be exempted from, or subject to more tailored versions of, any other FINRA rules? Are there other activities in which they should be permitted to engage, or activities that should be subject to different conditions?
Answer: The definition of a Private Securities Transaction in Rule 328 should be modified to carve out all transactions exempted by Congress from securities registration pursuant to the Registration Exemption for Merger and Acquisition Brokers that was enacted on March 29th 2023. Further, Rule 328 should be modified to allow other PSTs with the approval of the firm.
A.5 Should FINRA create a tailored rule set for “finders” or other types of limited purpose broker-dealers who are otherwise required to comply with the same FINRA rules as full-purpose broker-dealers?
Answer: Yes.
D.1 Are there any other FINRA rules, guidance, operations or administrative processes that should be updated or amended that would further facilitate capital formation while protecting issuers and investors? If so, what has been your experience with these rules, guidance, operations or processes and what are your suggestions for improving them?
Answer: Please consider whether or not CABs need to have a PCAOB audit. A non PCAOB audit should provide the appropriate level of protection. Also please consider whether an audit is necessary at all. The only funds at risk in these entities are the funds of the owners of the entities. Extra compliance time and costs makes it less likely that professionals will seek to provide CAB services which has a negative impact on capital formation.
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Waterview Securities, Inc. Comment On Regulatory Notice 25-06
A.1 Should CABs be permitted to engage in a broader range of M&A and private placement activities than currently specified in the CAB rules?
Answer: Probably not.
A.2 CABs may not act as an agent for secondary transactions involving unregistered securities, other than in connection with the change of control of a privately held company. Should CABs be permitted to act as placement agents in connection with other types of secondary transactions involving unregistered securities?
Answer: No comment
A.3 CABs may act as an agent in connection with the sale of newly issued unregistered securities only to institutional investors, which does not include individual investors unless they own $5 million or more in investments.12 Should CABs be permitted to sell newly issued unregistered securities to less wealthy accredited investors that do not meet the $5 million threshold?
Answer: Yes
A.4 Are there any other aspects of the CAB rules that FINRA should modify that would further facilitate capital formation while protecting investors, and to better coordinate with the exemptions enacted by Congress and proposed by the SEC? For example, should CABs be exempted from, or subject to more tailored versions of, any other FINRA rules? Are there other activities in which they should be permitted to engage, or activities that should be subject to different conditions?
Answer: The definition of a Private Securities Transaction in Rule 328 should be modified to carve out all transactions exempted by Congress from securities registration pursuant to the Registration Exemption for Merger and Acquisition Brokers that was enacted on March 29th 2023. Further, Rule 328 should be modified to allow other PSTs with the approval of the firm.
A.5 Should FINRA create a tailored rule set for “finders” or other types of limited purpose broker-dealers who are otherwise required to comply with the same FINRA rules as full-purpose broker-dealers?
Answer: Yes.
D.1 Are there any other FINRA rules, guidance, operations or administrative processes that should be updated or amended that would further facilitate capital formation while protecting issuers and investors? If so, what has been your experience with these rules, guidance, operations or processes and what are your suggestions for improving them?
Answer: Please consider whether or not CABs need to have a PCAOB audit. A non PCAOB audit should provide the appropriate level of protection. Also please consider whether an audit is necessary at all. The only funds at risk in these entities are the funds of the owners of the entities. Extra compliance time and costs makes it less likely that professionals will seek to provide CAB services which has a negative impact on capital formation.