Investment Banking Services to Non-Profits Requires BD Registration
The staff of the SEC’s Division of Trading and Markets has denied no-action relief to a consultant seeking comfort that it did not need to register as a broker-dealer because it provided investment banking services only to non-profit hospitals. The services included consulting about acquisitions and divestitures and transaction assistance. The consultant would receive various forms of compensation, including fixed fees, hourly fees, and transaction commissions. The consultant argued that it could avail itself of the broker-dealer exemption for non-profits. The SEC staff indicated that the third party consultant was not itself a qualifying nonprofit and that it received transaction-related compensation.
OUR TAKE: Investment banking services where a firm counsels and assists with business combinations, divestitures, and strategic options usually requires registration as a broker-dealer. The Division of Trading and Markets staff reads the registration rules broadly and the exemptions narrowly.