Page 11 - To Register or Not to Register: A Definitive Guide to Understanding the Broker Registration Requirement

Dismiss at Your Own Risk
Each state has its own penalties for breach of the broker-dealer and agent registration requirement. Perhaps the liability with most teeth comes in the form of an investor that can sue for rescission of the entire ofering. Further, a state’s action against an issuer or its associated person will afect the issuer’s ability to raise capital in the future. A sanction from the state would likely rise to the level of a bad actor disqualification event under federal regulation, which means those involved would be precluded from participating in a future Reg D ofering. An issuer can mitigate many of these risks by use of competent outside counsel, use of a broker-dealer registered in all 50 states, and maintaining an active awareness of the securities ofering process.
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