• Paul Peter Nicolai

Non-Registered Broker Dealer Means No Contract

Updated: Nov 8

An investment banking firm which assists companies in selling their businesses sued to enforce a commission agreement from the sale of a business. It was not registered as a broker-dealer. The court said the contract was voidable in that it involved a practice in violation of securities law, specifically inducing or attempting to induce the purchase or sale of any security as an unregistered broker.


The fact that a buyer could have requested that the sale be completed as an asset sale did create a safe harbor. Requiring registration even when the ultimate form of the transaction is uncertain not only serves the statutory purposes of protecting investors but also ensures brokers comply codes of conduct.


Because the was voidable, the defendant was not required to pay


WHY THIS IS IMPORTANT… This is only one of the possible effects of having a non-registered broker dealer assist in any securities transaction like raising money for or selling a company. In many instances, the investors or buyers also have a right to their money back whether something goes wrong or not if a non-registered broker dealer was involved in the transaction.

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