FINRA (the Financial Industry Regulatory Authority) is soliciting public comment on a proposed rule set (LCFB Rule 14-09) for firms that meet the definition of “limited corporate financing broker” (LCFB). An LCFB is a firm that engages solely in any one or more of the following activities:
- Advising an issuer, including a private fund, concerning its securities offering or other capital raising activities
- Advising a company regarding its purchase or sale of a business or assets or regarding its corporate restructuring, including a going-private transaction, divestiture or merger;
- Advising a company regarding its selection of an investment banker
- Assisting in the preparation of offering materials on behalf of an issuer
- Providing fairness opinions
- Qualifying, identifying or soliciting potential institutional investors
The rationale behind LCFB Rule 14-09 is that while LCFB firms may receive transaction-based compensation as part of their services, they do not engage in many of the types of activities typically associated with traditional broker-dealers. An LCFB firm would be prohibited from maintaining customer accounts, handling customer funds or securities, exercising investment discretion on behalf of a customer, or engaging in proprietary trading of securities or market-making activities.…