What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
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§ 1A:2.6 BROKER-DEALER REGULATION<br />
(iii) all transactions would be effected only by direct contact<br />
between the bulletin board participants. 126<br />
The SEC identified several activities by the sponsors of bulletin<br />
boards that could require them to reg<strong>is</strong>ter as broker-dealers. The<br />
activities include:<br />
(i) the publication of quotations;<br />
(ii) active solicitation of investors (for example, by targeting<br />
potential investors with direct mailings and follow-up email);<br />
(iii) involvement in negotiations or other d<strong>is</strong>cussions with buyers<br />
and sellers;<br />
(iv) providing advice to <strong>is</strong>suers for their offering materials or<br />
investment advice with respect to any particular security;<br />
(v) involvement in any way with the execution, settlement, or<br />
clearance of transactions, including preparing or sending<br />
transaction confirmations (other than providing the functionality<br />
of order transm<strong>is</strong>sion);<br />
(vi) matching buyers and sellers either by matching the l<strong>is</strong>t of<br />
interested buyers with the l<strong>is</strong>t of interested sellers or through a<br />
bid and ask process that allows interested buyers to bid on the<br />
l<strong>is</strong>ted interest;<br />
(vii) handling of customer funds or securities;<br />
(viii) screening counterparties for creditworthiness or extension of<br />
credit in connection with the transactions;<br />
(ix) receipt of transaction-related compensation; and<br />
(x) exerc<strong>is</strong>ing d<strong>is</strong>cretion over the bulletin board website and<br />
having its name on the website. 127<br />
[F] ATSs and Securities Exchanges<br />
As the bulletin board letters show, the roles of a broker and an<br />
exchange can blur. The SEC has sought to d<strong>is</strong>tingu<strong>is</strong>h these roles.<br />
126. See Portland Brewing Co., SEC No-Action Letter (Dec. 14, 1999); Flamemaster<br />
Corp., SEC No-Action Letter (Oct. 29, 1996); PerfectData Corp.,<br />
SEC No-Action Letter (Aug. 5, 1996); Real Goods Trading Corp., SEC No-<br />
Action Letter (June 24, 1996).<br />
127. See GlobalTec Solutions, LLP, SEC No-Action Letter (Dec. 28, 2005); Sw<strong>is</strong>s<br />
American Securities, Inc., Streetline, Inc., SEC No-Action Letter (May 28,<br />
2002); Oil-N-Gas, Inc., Section No-Action Letter (June 8, 2000); Letter<br />
from Catherine McGuire, Chief Counsel, Div<strong>is</strong>ion of Market Regulation,<br />
to Lori Livingston, Transfer Online, Inc. (May 13, 2000); King & Spalding,<br />
SEC No-Action Letter (Nov. 17, 1992).<br />
1A–32