U.S. FINRA Capital Acquisition BD

On 6 November 2017, FINRA issued rules on pay-to-play and capital acquisition brokers (cabs).

Rules become effective on 6 December 2017, the text of the rules is set forth in Attachment A.


Scope of Activity

  • Applies to firms that are solely corporate financing firms that advise companies on M&A.
  • Advise issuer on raising debt and equity in private placement with institutional investors.
  • Or provide advice on consulting basis, to company analyzing their strategic alternatives.
  • The firms often are registered broker-dealers as receive transaction-based compensation.
  • However, the firms do not do many types of activities associated with traditional dealers.
  • They do not act as introducing brokers for customer accounts, or handle customer funds.
  • Do not take orders to purchase or sell securities either as principal or agent for customer.
  • Or exercise investment discretion for customer, or proprietary trading or market-making.


  • CAB required to meet FINRA by-laws, and core rules that are seen as applying to all firms.
  • Rule-set would include other FINRA rules that are tailored to address CAB business sector.
  • On general standards CAB (Rule 010 Series) as well as duties and conflicts (CAB Rule 200).
  • Includes registration rules, standard of admission, and for existing firms to change status.
  • Streamlined set of conduct rules, including standards of honor, use of deceptive practices.
  • Includes exception to the customer-specific suitability obligation to institutional investors.
  • CABs only permitted act as agent in a securities transaction, in very narrow circumstances.