How Can a Founder Check Whether an Introducer Is Properly Licensed to Raise Funds?
Short answer. Ask the introducer what activities they will perform and where they will perform them. Ask which registration or license they rely on. Then have your securities attorney check the relevant regulator's official records and assess the arrangement under the rules that apply to your offering. A claimed exemption or job title does not prove that the arrangement is permitted.
Check an introducer's status by defining their actual activities and asking your securities attorney to check applicable requirements and records. Licensing can depend on the offering, where the work takes place, how the introducer is paid, and the conduct involved. Someone described as an advisor or connector may still carry out activities that require registration or another form of regulatory permission.
Start With the Proposed Activities
Ask the introducer to describe, in writing, what they plan to do. Will they only pass along contact details, or will they solicit investors, discuss terms, recommend the investment, negotiate, handle subscription documents, or receive compensation tied to capital raised? Clarify where the work will take place and which investors they intend to contact.
Titles do not answer the regulatory question. The actual activities matter, along with how the person is paid and the details of the offering. Keep the description factual and share it with counsel before the introducer contacts prospective investors.
Check Official Records With Counsel
Ask your securities attorney which regulator and database apply to the company, the offering, and the introducer. Have counsel check the relevant official records and confirm whether a registration, license, exemption, or other condition is relevant. Record the search date and the exact name or entity reviewed, since individuals and firms can have similar names.
Do not rely only on a screenshot, an old certificate, a business card, or the person's own explanation. If the introducer says an exemption applies, ask counsel to evaluate that claim against the planned conduct and compensation. Rules can differ across jurisdictions, so a registration in one place may not settle the question elsewhere.
Review the Agreement and Compensation
Show counsel the proposed agreement, including any success fee, commission, equity, or other benefit. The agreement should describe the role accurately and state what the introducer may and may not do. Changing the person's title while leaving the same activities in place does not resolve a licensing issue.
Consider the related question of what to agree before paying a success fee, but do not assume fee terms alone determine whether the arrangement is permitted. Keep copies of outreach, introductions, materials shared, and discussions of terms. If the actual work changes, pause and ask counsel to review it before proceeding.
Use Diligence Beyond Registration
Regulatory status is one part of deciding whether to work with someone. Check references and relevant work history, and review communication habits and the quality of their records. In my experience, a person's conduct during initial conversations can tell you something about how they may handle a sensitive working relationship. Ask direct questions and pay attention to whether the answers are clear and consistent.
Set a process for approving investor communications and tracking each introduction. Make sure the company knows who is speaking for it and which materials are approved. If you cannot confirm a material claim about licensing or the proposed role, wait to begin investor outreach until your attorney has reviewed it.
Read next: How should a founder decide whether to raise equity, debt, or a mix of both? and How much capital should a company raise to reach its next meaningful milestone?
You can expect others to do that on you.
Sources: Richard C. Wilson solo transcripts. Informational only, not financial, legal or tax advice.