Why Finalis Requires Documentation of Client Transactions: A Legal, Regulatory and Fiduciary Imperative

As a registered broker-dealer under the oversight of the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), Finalis Securities LLC (Finalis) is committed to maintaining the highest standards of regulatory compliance, financial transparency, and client trust. 

A core part of this commitment is our responsibility to supervise, document, and substantiate all transactions conducted by our registered representatives – especially those that result in compensation to Finalis, such as success fees or commissions. 

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Regulatory Supervision: A Non-Delegable Duty 

FINRA Rule 3110 mandates that broker-dealers maintain a system for supervising associated persons that is reasonably designed to achieve compliance with securities laws. 

FINRA Rule 4511 (and SEC Rules 17a-3/4) requires members to make and preserve books and records that accurately reflect the business of the broker-dealer. 

What this means in practice: 

● Finalis must review and retain executed documentation evidencing the transaction and its terms 

● This is required for supervisory oversight, regulatory defensibility, and audit substantiation. 

● Without this documentation, Finalis cannot demonstrate that the transaction occurred as represented, which is a fundamental compliance failure. 

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Rebuttal to Contrary Legal Interpretations 

From time to time, Finalis receives contradictory legal interpretations from legal advisors of issuers that suggest that it is not a requirement to provide Finalis with executed documentation,

so long as there is a separate record showing the registered representative’s fee and enterprise value, and that documentation need only be provided upon FINRA or the SEC’s specific request. 

This interpretation is incomplete and materially inaccurate. 

Finalis is not permitted to rely on “separate records” or conditional availability. Under FINRA Rules 3110, 4511, and 2040, Finalis must proactively obtain and retain documentation sufficient to: 

● Substantiate the nature and terms of the transaction; 

● Verify the basis for fee payments; 

● Demonstrate active supervision; and 

● Prepare for routine FINRA examinations, where records must be readily available – not conditionally retrievable from third parties. 

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Waiting for a FINRA or SEC request is not compliant with the broker-dealer’s affirmative obligations. 

Regulators expect broker-dealers to maintain this documentation on file as a matter of course, not only “upon request.” Failure to do so may be construed as inadequate supervision or even concealment. 

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Revenue Recognition and Audit Integrity 

As a regulated financial entity, Finalis must adhere to U.S. GAAP and PCAOB audit standards. Whenever Finalis receives revenue from a transaction: 

● We must substantiate it with clear documentation; and 

● We must maintain audit-ready records showing valuation, consideration, and triggering events (e.g., closing). 

Without documentation such as the executed purchase agreement, we would be unable to complete financial audits, recognize revenue appropriately, or withstand regulatory scrutiny. 

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Balancing Regulatory Duty with Confidentiality 

We understand that client transactions, especially in private markets and M&A contexts, often involve sensitive, confidential documentation. At Finalis, we respect the importance of confidentiality, and we maintain robust policies and procedures to protect non-public information in accordance with applicable privacy and data security laws.

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Guidance for Finalis Members 

When a client or counterparty hesitates to share documentation, we encourage reps to use the following talking points: 

1️⃣Regulatory Requirement: Finalis is required by FINRA rules and SEC regulations to obtain and retain executed documentation supporting every fee-earning transaction. This is not discretionary. 

2️⃣Audit and Supervisory Duty: Our auditors and regulators demand direct, primary evidence of the terms and conditions of each transaction—not summaries or side letters. 

3️⃣Confidentiality Assurance: Finalis has strict policies to protect client confidentiality. Documentation shared with Finalis is stored securely, accessed only by authorized personnel, and shared externally only if required by law or regulation. 

4️⃣Enabling Your Business: Our regulatory compliance protects both the rep and the client by ensuring the transaction was conducted under a properly supervised, legally compliant framework. 

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Our Commitment to Compliance, Transparency, and Trust 

Finalis does not view documentation requirements as red tape. We see them as a foundation of integrity that: 

● Enables our registered representatives to operate under a legally sound platform; ● Builds trust with clients and regulators alike; and 

● Ensures sustainable growth within the financial system. 

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If you have any questions about these requirements, our supervisory processes, or best practices for engaging with clients on documentation requests, please contact the Finalis Compliance team.