Thomas Mauriello Speaks at Webinar on Raising Capital in the Cannabis Industry With Unregistered Broker-Dealers
February 19, 2021
Attorney Thomas Mauriello was one of the featured speakers at a webinar on "Financing Without a License: Raising Capital in the Cannabis Industry with Unregistered Broker-Dealers."
The webinar was co-Sponsored by the Los Angeles County Bar Association, Cannabis Law Section, the Sacramento County Bar Association, Cannabis Law Section, and the California Cannabis Industry Association. The other speakers included Meital Manzuri of Manzuri Law in Los Angeles, Max Riffin of Burns & Levinson in Boston, and Ignacio A. Sandoval of Morgan Lewis in Washington, DC. The Moderator was mediator/arbitrator Phillip Neiman of JAMS in San Francisco.
The webinar explored the unique challenges of fund raising in the cannabis industry. Companies with cash needs routinely use intermediaries to assist in the capital raising process. Federal law broadly requires financial intermediaries to be registered as brokers with the Securities and Exchange Commission ("SEC").
"Finders" are unregistered placement agents, consultants or go-betweens who introduce businesses to prospective Investors. The legal status of finders is murky and they operate in a regulatory gray area. Companies that retain finders face potentially serious consequences for doing so, and finders face significant risks if they are deemed unregistered securities brokers. Marijuana-related businesses that engage finders, and unregistered intermediaries who source capital for those businesses, face additional risk because of federal prohibition.
The webinar covered a range of topics important for companies and finders in the cannabis sector and their counsel, including: the federal regulatory scheme for broker-dealers; the current legal status of finders as developed through SEC staff no-action letters, enforcement proceedings, and court decisions; the many risks associated with using and being an unlicensed intermediary; finder-related issues unique to the cannabis sector; and a recent proposal by the SEC to create a "safe harbor" exemption for finders.