Can You Pay a Marketing Agency a Percentage of Capital Raised? Success Fees and Broker Registration

An issuer can pay a percentage of capital raised only where the recipient is a registered broker-dealer or an associated person of one — a fee tied to dollars raised is transaction-based compensation, and Section 15(a)(1) of the Securities Exchange Act of 1934 generally requires a person effecting securities transactions for the account of others to be registered as a broker. That is why capital-raise marketing is normally priced as a monthly retainer, a fixed project fee, or a fee on managed media spend, while any commission on the raise itself flows through the broker-dealer of record rather than through the marketing vendor.

Founders ask for a success fee for a rational reason: it moves risk onto the vendor and preserves cash before the round closes. The obstacle is statutory rather than commercial, and the consequences do not stay with the vendor. Below: what makes a fee "transaction-based," where each common pricing model sits, the Reg-CF rule written specifically for paid promotion, and what issuers structure instead.

Why the fee structure is a securities question, not a procurement question

Section 3(a)(4) of the Exchange Act defines a broker as a person engaged in the business of effecting transactions in securities for the account of others. Section 15(a)(1) makes it unlawful for a broker to use the mails or any means of interstate commerce to effect securities transactions without registration. Neither provision turns on job title. An entity that markets itself as a "marketing agency," an "investor relations consultant," or a "capital markets advisor" is analyzed on what it actually does and how it is actually paid.

Compensation is the factor that carries the most weight in that analysis, and the clearest codified expression of it sits in 17 CFR 240.3a4-1, Associated persons of an issuer deemed not to be brokers. That rule is the safe harbor letting an issuer's own officers and employees participate in selling the issuer's securities without registering. Rule 3a4-1(a)(2) conditions the safe harbor on the associated person being "not compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities."

The structural point is the one issuers miss. If a commission arrangement removes the safe harbor from the issuer's own personnel — people with an employment relationship, substantial non-securities duties, and no other principal — an outside vendor paid on the same basis is in a weaker position, not a stronger one. Rule 3a4-1 layers further conditions on top — no statutory disqualification, no association with a broker or dealer, one of three alternative tests — but the compensation condition disposes of most agency arrangements first.

Where common agency pricing models sit

The models below run from furthest from a registration question to closest. This is a gradient, not a legal opinion — characterization depends on the full scope of what the vendor does, and issuers typically have counsel review the engagement letter first.

Two things follow. Performance incentives are not the problem — contingency on the securities transaction is; a fee scaling with qualified leads is a different instrument from one scaling with dollars wired. And the analysis looks through labels: renaming a percentage of the raise a "marketing performance bonus" does not change what it is measured against.

The Reg-CF rule written specifically for paid promotion

Regulation Crowdfunding addresses paid promotion directly, and the rule is narrower than most issuers expect. Under 17 CFR 227.205, Promoter compensation, an issuer may compensate a person to promote a Section 4(a)(6) offering through the communication channels the intermediary provides on its platform — but only if the issuer takes reasonable steps to ensure the promoter clearly discloses the receipt, past or prospective, of that compensation with every such communication.

The instruction to Rule 205(a) reaches further than the words "paid promoter" suggest: it applies whether or not the compensation is specifically for promotional activity, and covers persons otherwise employed by the issuer as well as those hired to promote. An employee posting supportively in a portal comment thread falls inside it.

Rule 205(b) is the harder constraint. Outside the intermediary's communication channels, an issuer may not compensate anyone to promote a Reg-CF offering unless the promotion is limited to notices permitted by 17 CFR 227.204, Advertising. Rule 204 permits only a notice directing investors to the intermediary's platform and containing no more than three categories: the fact of the Section 4(a)(6) offering with the intermediary's name and link; the terms of the offering; and factual information about the issuer's legal identity and business location. A paid influencer campaign, an affiliate program, or a sponsored newsletter placement that goes beyond that notice sits outside Rule 205(b). The advertising constraints are covered further in SEC advertising rules for Reg-D 506(c).

Who can lawfully take a piece of the raise

Every Reg-CF offering already runs through a registered intermediary. 17 CFR 227.300, Intermediaries requires that a person acting as an intermediary in a Section 4(a)(6) transaction be registered with the Commission as a broker or as a funding portal, and be a member of FINRA. Those entities are compensated on the raise as a matter of course, and their fee schedules are public — the comparison is set out in funding portal vs. broker-dealer.

Reg-A+ and Reg-D 506(c) offerings are not required to use an intermediary, but many issuers engage a broker-dealer of record — Dalmore Group and DealMaker Securities are two registered firms operating in this segment — precisely because that entity can lawfully receive transaction-based compensation and supervise selling activity. Routing outcome-linked economics through that registered entity, and engaging the marketing vendor separately on a non-transaction basis, is the conventional structure.

A finder's fee is the same instrument under a different name. There is no general federal finder's exemption in force for private placements — a limited one was proposed for comment in 2020 and not adopted. A few states have their own finder regimes, which address state law only and do not resolve the federal question.

Structures issuers use instead

1. Price the marketing scope, not the outcome. A retainer or fixed project fee tied to defined deliverables — funnel build, creative production, media management, reporting — keeps the vendor's consideration measured against work performed.
2. Where incentives are wanted, tie them to marketing outputs. Cost per qualified lead, cost per completed verification, or landing-page conversion thresholds measure the vendor's actual product. Counsel generally treat metrics resembling investor introductions as closer to the line than metrics resembling media performance.
3. Route any transaction-based economics through the registered entity. The broker-dealer of record or funding portal is the party in the structure that can receive them.
4. Get the characterization in writing before signing. Issuers typically have securities counsel review the compensation clause of any marketing or IR engagement letter for a live offering, alongside the scope-of-services clause — the two are read together.
5. Build the Rule 205 disclosure mechanic into the Reg-CF workflow. If anyone the issuer compensates will post in portal communication channels, the disclosure attaches to each communication — an operational requirement, not a one-time filing. How the engagement is characterized in Form C or Form 1-A should also match how it is characterized in the contract.

Why diligence finds this later

The exposure is not limited to an enforcement action against the vendor. Section 29(b) of the Exchange Act provides that contracts made in violation of the Act, or whose performance involves a violation, are void as to the rights of the person who committed the violation — the provision counsel cite when analyzing whether an unregistered-broker arrangement gives a counterparty a rescission right. The involvement of an unregistered person in a securities sale also surfaces in later diligence: a Series A lead, an acquirer, or an underwriter reviewing capital history will ask who was paid what on prior rounds, and an unresolved answer becomes a disclosed contingency.

The practical failure mode is mundane: an issuer signs a success-fee engagement early, when cash is tight and the vendor will take the risk, and two years later the arrangement is a diligence item on a term sheet that costs more to unwind than the retainer would have.

Frequently Asked Questions

Can a marketing agency legally take a percentage of the capital I raise?

Only if the agency is a registered broker-dealer or an associated person of one. A fee measured against dollars raised is transaction-based compensation, and Section 15(a)(1) of the Exchange Act generally requires a person effecting securities transactions for the account of others to register as a broker. Most marketing agencies are not registered, which is why capital-raise engagements are typically priced as retainers, project fees, or fees on media spend.

Is a finder's fee different from a success fee?

Not in substance. Both are compensation contingent on a securities transaction closing, and the label does not change the analysis. There is no general federal finder's exemption in force for private placements; a limited exemption was proposed in 2020 and was not adopted. A small number of states have adopted their own finder provisions, which address state law only and do not resolve the federal registration question.

Can I pay per investor introduced instead of a percentage of the raise?

A per-investor bounty is commonly treated as transaction-based compensation even when it is described as a lead fee, because it is contingent on an investor actually funding. Fees measured against marketing outputs — qualified leads delivered, verifications completed, media placed — sit further from that characterization than fees measured against investors who invest. Where an issuer wants outcome-linked economics, counsel generally look at whether the metric tracks the marketing work or the securities transaction.

What does Rule 205 require when I pay someone to promote a Reg-CF offering?

Under 17 CFR 227.205, an issuer may compensate a person to promote a Reg-CF offering through the intermediary's communication channels only if the issuer takes reasonable steps to ensure the promoter clearly discloses the compensation with each communication. Outside those channels, Rule 205(b) permits compensated promotion only where it is limited to the notices allowed by Rule 204. The disclosure obligation applies whether or not the compensation was specifically for promotional activity, and it reaches employees as well as hired promoters.

Does paying in equity or warrants instead of cash avoid the issue?

No. The analysis turns on whether the consideration is contingent on the securities transaction, not on the form the consideration takes. Warrants or shares that vest on the closing of a raise are commonly analyzed the same way as a cash commission on the same raise.

Who in my raise can be paid on the transaction?

The registered participants. Under 17 CFR 227.300 a Reg-CF offering must run through a broker or funding portal registered with the Commission and a member of FINRA, and Reg-A+ and Reg-D issuers frequently engage a registered broker-dealer of record. Those entities can receive transaction-based compensation; marketing vendors are engaged separately on a non-transaction basis.

Getting the engagement structured before the raise starts

Compensation structure is one of the few decisions in a raise that is far easier to get right at the engagement-letter stage than afterward. The commercial instinct behind a success fee is sound; the instrument is the problem, and the same alignment can usually be built with deliverable- and output-linked pricing instead.

Growth Turbine has provided marketing support across more than $490M in aggregate issuer-reported totals, with 200+ campaigns supported across Reg-CF, Reg-D 506(c), Reg-A+ and tokenized securities offerings, on 23+ crowdfunding platforms and across 25+ industries. Our equity crowdfunding marketing engagements are scoped and priced as marketing work, with any transaction-linked economics left to the registered intermediary or broker-dealer of record — the same posture applies whether the raise runs as a Reg-CF campaign or an accredited-only Reg-D 506(c) offering. Talk to our team about scoping an engagement before the offering documents are finalized.

Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute legal, financial, or investment advice. Always consult with qualified legal counsel and financial advisors before launching a capital raise.