{"id":5135,"date":"2016-04-04T10:48:01","date_gmt":"2016-04-04T15:48:01","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/avoid-crowdfunding-lawsuits-use-intermediaries-cautiously.html"},"modified":"2026-05-11T12:00:00","modified_gmt":"2026-05-11T17:00:00","slug":"avoid-crowdfunding-lawsuits-use-intermediaries-cautiously","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/avoid-crowdfunding-lawsuits-use-intermediaries-cautiously.html","title":{"rendered":"Avoid Crowdfunding Lawsuits: Use Intermediaries Cautiously"},"content":{"rendered":"\n
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Avoid Crowdfunding Lawsuits: Use Intermediaries Cautiously<\/h1>\n\n
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\n By Amber Sheppard, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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A crowdfunding intermediary is a registered entity, such as a broker-dealer or funding portal, that serves as a middleman between a business and potential crowdfunding investors.<\/p>\n\n <\/div>\n\n\n\n

When you start crowdfunding<\/span>, you won\u2019t see many articles or discussions about the importance of intermediaries for small businesses<\/span>. It isn\u2019t an interesting topic as startups<\/span> or finding a target market, but it\u2019s just as important.<\/p>\n

Equity <\/span>crowdfunding<\/span> is a tool for raising capital by selling company shares to many people. Regulation <\/span>crowdfunding<\/span> (Reg CF) is the legal framework governing how crowdfunding<\/span> is done to protect investors.<\/p>\n

This FindLaw article explains legal issues to be aware of when using intermediaries with wholesalers, distributors, or in real estate transactions.<\/p>\n

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Types of Intermediaries<\/h2>\n

It\u2019s easy to think of intermediaries as middlemen. Each intermediary has specific duties and legal requirements for acting with business owners. The intermediary works on marketing channels and with interested buyers. Their goal is to make business sales for the company\u2019s product or\u00a0equity.<\/a><\/p>\n

All intermediaries must\u00a0register with the SEC<\/a>. The types of intermediaries you might encounter during crowdfunding<\/span> are explained below.<\/p>\n

Finders<\/h3>\n

There is no shortage of self-proclaimed crowdfunding<\/span> and social-media experts. These people or crowdfunding<\/span> portals<\/span> offer to assist you with your crowdfunding<\/span> offering<\/span>. Securities offerings often attract unregistered finders. These people offer to introduce an investor in exchange for a finder\u2019s fee. The fee is usually contingent on the sale. It\u2019s like commissions or success fees in other industries.<\/p>\n

These activities are promotional activities under federal law. If you must abide by Securities and Exchange Commission<\/span> regulations, this is a violation.<\/p>\n

Promoters<\/h3>\n

Under the\u00a0Securities Act of 1933<\/a>, which is still law today, a promoter is:<\/p>\n