(This is the first of a two-part examination of the benefits of hiring a Managing Broker-Dealer (MBD) to handle capital raises. Part One addresses six benefits, Part Two will explain the remaining seven. Both will be able to be found under “TOBIN Tutorials.”)
Every issuer that raises funds through private placements wants to have a successful raise with excellent execution and minimal mishaps. And every issuer would like to offload the monotonous regulatory work involved in these offerings. Engaging a Managing Broker-Dealer can help you raise capital more efficiently and more compliantly.
We are often asked what the tangible advantages are of hiring a Managing Broker-Dealer. There are many, so it is important to thoroughly examine each one and, in so doing explain why at Tobin & Company, our objective is to help you execute a smooth fund-raising offering that is in full compliance with U.S. securities laws, without headaches, disruptions or delays.
Below, in order of importance, are the benefits we judge to be most valuable, and our clients have told us are most valuable to them, based on our years of experience serving as managing broker-dealer for numerous capital raises, in a wide variety of business sectors.
1) Regulatory Compliance: Raising capital involves navigating a complex matrix of financial regulations. An MBD can help ensure that your company stays in compliance with all relevant laws and regulations. This includes regulations from enforcement entities such as the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the independent and separate, but no less important, individual state securities laws. Securities laws are always changing. MBDs help fund raisers every day, so we stay abreast of every change implemented by enforcement entities. An MBD on your team helps you stay compliant and avoid minor, and sometimes major, slip-ups.
2) Financial Expertise: TOBIN holds a deep understanding of financial markets and instruments. We can help structure the offering to be attractive to investors, price the securities appropriately and advise on the timing of the capital raise.
3) Oversight and Protection of Your Internal FINRA-Licensed Sales Force: You may deploy a FINRA-licensed internal sales force with individuals who are permitted to earn commissions on their sales. Or you may want to build such a sales force internally. Either way, TOBIN can supervise and hold the licenses of your commissioned salespeople and monitor their interactions with prospective investors. We ensure that records of interactions with investors contain no errors, nor misleading or promissory statements, that might lead to malfeasance. TOBIN also implements all required procedures regarding individual licensing, archival of communications and oversight of selling practices.
4) Protection of Your Unlicensed Internal Sales Force: You may have an internal sales force that does not earn contingent compensation. But unless you are affiliated with a FINRA-licensed broker-dealer, the SEC may determine that those employees are “brokers,” in-fact, and must be licensed by the regulators. Engaging with a Managing Broker-Dealer can protect your non-commissioned sales force from being perceived by the SEC as “brokers,” which may cause delays and certainly create stress.
5) Outside Distribution Networks: As your Managing Broker-Dealer, TOBIN can help solicit and manage your Selling Group Members who have an established network of institutional and retail investors. This can increase both the reach, and speed, of your capital raise.
6) Due Diligence: MBDs conduct due diligence to validate the information presented to investors. This helps protect the issuer from potential legal liabilities and enhances investor confidence. And it helps make your offering compliant with the requirements of federal and state securities laws.
Warm regards,
