b' until something goes wrong. Violations are usually discovered when the investment fails, a manager flakes out and stops performing or responding to inquiries, or an investor wants out of a deal because of something that happened in their life (lost job, illness, legal issues, etc.). In that case, the investor either hires an attorney or complains to a securities regulator in an effort to get their money back.Securitiesviolationswillusuallybediscoveredduringasecurities investigationbytheSECorastatesecuritiesregulator,orduringpre-litigation discovery in a civil lawsuit filed by one or more investors. Once securities violations are discovered, all disgruntled investors may exert their rightofrescissionoruseitasleverageagainsttheissuertoforcea settlement. Think this only applies to external finders? Think again. The SEC has applied these same arguments to in-house employees, officers or directors, who received transaction-based compensation and who were not licensed securities brokers.Key Takeaways So, How Can You Legally Compensate Capital Raisers?1.Transaction-based compensation is illegal for anyone except licensed brokersall capital raisers who will be raising capital for an issuer must have a role in management other than raising money, and their compensation must be based on the non-sales role. This rule also applies to officers, directors, managers, Co-GPs, and employees. No 250'