By Maximum Possibilities | October 7, 2025
If you advise business owners or refer them to capital or M&A partners, this matters.
The SEC is stepping up enforcement in 2025 against unregistered individuals acting as brokers. That includes people working in private markets. It includes capital raises. It includes referrals that may seem routine.
You don’t have to break the rules yourself to feel the impact. If someone you trust steps outside the lines, your client, and reputation, can get unintentionally caught in the fallout.
This article explains:
- What qualifies as broker-dealer activity
- What recent enforcement tells us
- Why private deals are not exempt
- What misclassification really costs
- How to protect your clients and yourself
What Triggers Broker-Dealer Classification
Under federal securities law, a broker is anyone who facilitates securities transactions for others. A dealer buys and sells on their own account.
You may not think of someone as a broker. But the SEC might.
The line is usually crossed when someone:
- Introduces investors or buyers
- Helps structure a securities transaction
- Gets paid based on a successful deal
- Participates in negotiations or due diligence
This includes finders, capital advisors, and intermediaries.
What We’re Seeing in 2025
The SEC is moving quickly this year. Several settlements and penalties have been made public.
Recent examples:
- PMAC Consulting paid $3 million for brokering private deals while unregistered
- True Capital paid over $595,000
- Three advisers were charged in January and paid $540,000 in combined penalties
- Separately, twelve firms paid $63 million in fines for failing to preserve communications
These are not just public company cases. Most involved private markets.
The issue is not what someone calls themselves. It’s what they actually do.
Why This Affects Trusted Advisors
If you refer clients to someone who introduces investors, helps place capital, or structures terms, and that person is unregistered, you’ve exposed your client to enforcement risk.
You may have done nothing wrong. But your reputation is still tied to the referral.
You are trusted to send your clients to professionals who do things the right way. That includes knowing when someone needs to be licensed and whether they actually are.
The Risk in Private Transactions
Private companies often assume they’re exempt from SEC scrutiny. That’s false.
Private markets may have more flexibility, but they are still regulated. Broker-dealer registration requirements apply whether the deal is public or private.
The fact that a raise happens quietly does not protect anyone from penalties.
If your client hires an unregistered advisor who takes a fee on close, that deal is exposed. And so is everyone involved.
What Misclassification Really Costs
Enforcement is only part of the risk. The hidden costs often cut deeper.
Here’s what misclassification can lead to:
- Time lost to investigations
- Refund of all fees earned
- Reputational harm for the founder and their team
- Barriers to future capital access
- Missed growth because the deal failed to close
Even if a client is cleared, the damage can linger. Investors remember. So do banks and strategic buyers.
What Trusted Advisors Should Do
If you refer capital contacts or deal partners, here are five questions to ask:
1. How are you compensated?
Success-based fees can trigger registration requirements.
2. Are you licensed or registered as a broker-dealer or a Registered Agent of a broker dealer?
3. Are you involved in structuring, negotiating, or marketing the deal?
That may count as broker activity.
4. Do you preserve all client communications?
SEC rules apply to messages, emails, and chats.
5. Do you have legal counsel reviewing your agreements?
Assumptions don’t hold up in an investigation.
These are basic checks. But most violations start with skipping them.
It’s Not About Bad Intent
Most people who get this wrong aren’t trying to. They think they’re helping. They trust what worked in the past.
But the SEC doesn’t weigh intent. It weighs activity.
If someone is helping raise capital or involved in selling securities and getting paid on results, the rules may apply. And if they’re unregistered, everyone near the deal could suffer.
You are the First Line of Protection
Your clients trust your recommendations. They expect you to send them to the right professionals. That includes making sure the person raising capital, finding buyers, or advising on the deal is operating within the law.
It’s not just a matter of legal exposure. It’s about protecting the deal, the business, and your own credibility.
If you’re unsure whether someone is properly registered, ask. And if you’re looking for a licensed partner who works with integrity, we’re happy to walk through the process with you.
Want to learn about Strategic Readiness? Check out the first blog in our Strategic Readiness Series: Strategic Readiness: It’s Not About Timing. It’s About Being Ready When It Counts.
Ready to talk about your options with Raising Capital? Contact us today!
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