FINRA Expands Permissible Activities Under Capital Acquisition Broker Rules

FINRA adopted amendments to the Capital Acquisition Broker ("CAB") rules to expand permissible activities and reduce regulatory burdens.

In a Regulatory Notice, FINRA stated that the amendments expand the definition of "institutional investor" to include "eligible employees," such as knowledgeable employees, directors, and policy-making officers of an issuer. The revised rules now permit CABs to act as placement agents or finders on behalf of institutional investor buyers—rather than just issuers—in connection with the sale of newly issued, unregistered securities. FINRA said the amendments were designed to address operational and competitive challenges while maintaining the investor protections appropriate for a CAB's limited institutional business model. 

FINRA detailed several other operational expansions for CABs. Under the revisions, CABs may now represent buyers, sellers, or both (provided there is clear written disclosure and consent) in change-of-control transactions for privately held companies. Further, the updated rules permit CABs to facilitate secondary transactions of unregistered securities between institutional investors, allow CAB-associated persons to participate in private securities transactions subject to FINRA Rule 3280 ("Private Securities Transactions of an Associated Person"), and permit CABs to receive securities as compensation under specific conditions. FINRA also aligned the CAB rules with the new statutory Exchange Act exemption for M&A brokers.

The amendments take effect on March 25, 2026.