FINRA Rule 3220: What CPAs and Attorneys Need to Know About M&A Referral Fees
Metro Equity Capital · Educational Resource
FINRA Rule 3220 prohibits FINRA-registered broker-dealers from paying referral fees or transaction-based compensation to individuals or firms that are not themselves registered. For CPAs and attorneys who refer clients into M&A transactions, this creates a practical question: how can you participate in the value you create by introducing a client to an M&A advisor without violating securities regulations? The answer lies in properly structured co-advisory arrangements where each party provides defined, separately compensable professional services.
What Is FINRA Rule 3220?
FINRA Rule 3220 (formerly NASD Rule 2830) governs payments by FINRA member firms to non-member entities. The rule prohibits member firms from paying transaction-based compensation — referral fees, finder's fees, or success fees tied to the completion of a securities transaction — to any person or entity that is not itself a registered broker-dealer. This means that a FINRA-registered M&A advisor cannot pay a CPA or attorney a percentage of the advisory fee simply for making an introduction, regardless of how the payment is documented or characterized.
Why This Matters for CPAs and Attorneys
CPAs and attorneys are frequently the first professionals a business owner consults when considering a sale. This creates a natural referral dynamic. The problem arises when the M&A professional offers to share fees with the referring CPA or attorney.
This fee-sharing violates Rule 3220, exposing the advisor to regulatory action and potentially tainting the transaction.
The entire transaction may involve unregistered broker-dealer activity — creating rescission risk that can unwind the client's deal and expose the referring professional to malpractice liability.
The Difference Between Fee-Splitting and Co-Advisory
A payment made solely for the introduction — the referring professional receives compensation based on the transaction closing, without providing any defined services beyond the referral itself. This is prohibited under FINRA Rule 3220.
Each professional provides defined, documented services within the scope of their own professional license. Each party is compensated for their own work product, not for the introduction. Compensation is tied to services rendered, not whether the transaction closes.
How a Compliant Co-Advisory Arrangement Works
The CPA or attorney identifies a client considering a sale and introduces them to Metro Equity Capital. No compensation is paid for this introduction.
Metro Equity Capital engages the client for M&A advisory services under FINRA supervision through GT Securities, Inc.
The CPA or attorney continues to provide their own professional services to the client — tax structuring, legal review, financial statement preparation — under a separate engagement agreement.
Each party is compensated for their own defined services. The CPA or attorney invoices the client for their professional services. Metro Equity Capital receives advisory fees for M&A execution. No fee-splitting, no referral payment, and no regulatory exposure for either party.
Protecting Your Professional License
Referring a client to an unlicensed M&A intermediary creates professional liability risk. If the transaction is later challenged on rescission grounds, the referring CPA or attorney may face claims that they facilitated an unregistered securities transaction by directing the client to an unlicensed broker. Referring to a FINRA-licensed firm eliminates this risk and demonstrates the standard of care expected of a trusted advisor. Metro Equity Capital operates through GT Securities, Inc. (member FINRA/SIPC), and all referral arrangements are structured in full compliance with FINRA Rule 3220.
Frequently Asked Questions
Can I receive a flat fee for a referral?
If the M&A advisor is FINRA-registered, a flat fee paid solely for an introduction — even if not tied to the transaction outcome — may still be scrutinized under Rule 3220. The safest structure is a co-advisory arrangement where you provide defined professional services and are compensated for that work, not the referral.
What if I only refer to non-FINRA-registered brokers?
Non-registered brokers are not subject to FINRA rules, so Rule 3220 does not directly apply. However, if the transaction involves securities (stock sales, earn-outs, seller notes), the entire arrangement may constitute unregistered broker-dealer activity — creating far greater legal exposure for all parties, including you as the referring professional.
Can I negotiate the M&A advisor's fee on behalf of my client?
You can advise your client on the reasonableness of advisory fees based on market norms, but directly negotiating transaction-based compensation on behalf of the advisor could be viewed as participating in broker-dealer activity. Stay within the scope of your own professional advisory role.
Does Metro Equity Capital pay referral fees?
No. Metro Equity Capital does not pay referral fees to unlicensed third parties, in compliance with FINRA Rule 3220. Our co-advisory model ensures each party provides and is compensated for their own professional services, with clear scope and accountability.
Set Up a Compliant Co-Advisory Arrangement
Protect your clients and your practice. Work through a FINRA-registered firm with a structured co-advisory model.
Securities offered through GT Securities, Inc., member FINRA/SIPC, an unaffiliated entity. This content is for educational purposes only and does not constitute legal advice.