Capital Acquisition Brokers
Capital Acquisition Brokers (CABs) are firms that engage in a limited range of activities, including:
- advising companies and private equity funds on capital raising and corporate restructuring, and
- acting as placement agents for sales of unregistered securities to institutional investors under limited conditions.
Firms that elect to be governed under the CAB rule set are not permitted, among other things, to carry or maintain customer accounts, handle customers’ funds or securities, accept customers’ trading orders, or engage in proprietary trading or market-making.
The CAB rules became effective on April 14, 2017.
FINRA encourages qualifying member firms and new firms to consider converting to CAB status. Switching to CAB status will help ensure that qualifying firms will be governed by a regulatory structure that is better suited to the limited nature of their business.
To select CAB status, a current firm must contact its regulatory coordinator and request to change its Membership Agreement. A new firm must file a New Membership Agreement. In the membership agreement, firms must represent that their activities will be limited to those permitted for CABs and that they agree to comply with the CAB rules.
Testing the waters?
Firms that currently operate as full-service broker-dealers may convert to CAB status and then return to their former status within a year if they prefer full-service status. Firms that revert to full status within a year are not required to file a Continuing Membership Application.
Written Supervisory Procedures Review Checklist
FINRA is providing the Capital Acquisition Broker ("CAB") Written Supervisory Procedures Checklist ("WSP Checklist") as an optional guide to CABs to assist them in fulfilling their obligations under the CAB Rules. The checklist is an outline of selected key topics representative of the business activities typically engaged in by CAB members and permissible under FINRA’s CAB Rules. Note that following this WSP CAB Checklist template does not guarantee compliance with FINRA Supervisory Procedure Rules or provide a safe harbor from regulatory responsibility.
- 010. General Standards
- 100. Member Application and Associated Person Registration
- 200. Duties and Conflicts
- 300. Supervision and Responsibilities Relating to Associated
- 400. Financial and Operational Rules
- 500. Securities Offerings
- 800. Investigations and Sanctions
- 900. Code of Procedure
- 1000. Arbitration and Mediation