Amended rules taking effect next month give capital acquisition brokers new flexibility in private placements and secondary transactions while adding investor protection requirements.

February 25, 2026

FINRA’s Updated CAB Framework Opens New Doors For Private Market Activity

New amendments to Financial Industry Regulatory Authority rules governing capital acquisition brokers are set to take effect March 25, 2026, bringing meaningful changes to how these specialized broker-dealers can operate in private markets.

Expanded Definition Of Institutional Investor

Among the most significant changes is an expanded definition of who qualifies as an institutional investor under the CAB framework. The updated rules introduce a new category of eligible employees, encompassing certain officers, directors, and employees of an issuer — or of a person in control of an issuer — for which the CAB has provided specified services. This includes individuals meeting the standard of knowledgeable employees under Investment Company Act rules.

Notably, if any such eligible employee also meets the definition of a retail customer under Regulation Best Interest or a retail investor under Form CRS requirements, the CAB must still comply with those investor protection standards.

Broader Permitted Activities In Private Markets

The amendments expand the range of permitted CAB activities in private securities markets in several key ways:

• CABs may now act as a placement agent or finder not only on behalf of issuers, but also on behalf of institutional investor buyers in transactions involving newly issued, unregistered securities.
• CABs may represent either or both sides in change-of-control transactions involving privately held companies, provided they deliver clear written disclosure identifying which parties they represent and secure written consent from all involved.
• A new rule provision allows CABs to serve as placement agents or finders for institutional investors buying or selling unregistered securities in secondary transactions — provided both parties are institutional investors and the transaction qualifies for a registration exemption under applicable securities law.

Defining Control And Compensation

The rules establish a clearer definition of control for these purposes, including a presumption of control at a 25 percent threshold in voting securities or capital following completion of a transaction.

On the compensation side, CABs will now be permitted to receive securities of a privately held issuer client as payment for services, subject to specific limitations designed to keep such arrangements within the bounds of permitted CAB activities.

Additional Rule Updates

The amendments also update rules governing private securities transactions by CAB-associated persons, aligning the framework more closely with the broader FINRA rulebook.

Finally, the rules update references related to mergers and acquisitions brokerage activities to reflect the statutory exemption for M&A brokers established under the Securities Exchange Act, along with any related regulatory guidance permitting comparable activities outside of full broker-dealer registration.