Heard about venture catalysts? These newfangled matchmakers may have great connections to angel investors and venture capitalists, but they may also be breaking the law.

So warns Cynthia Sadick, a former counsel for the National Association of Securities Dealers and a partner at Sadick & O'Brien, in Boulder, Colo. Making introductions is one thing, says Sadick, but "we're running into quite a few situations where venture catalysts and money finders are out there negotiating deals for companies and getting paid for the transaction without knowing the securities laws."

The problem: the matchmakers are not broker-dealers. Basically, under the Securities Exchange Act of 1934, any person who negotiates the sale of stock and receives a percentage of the transaction as payment must be a registered broker-dealer. Those running afoul of the broker-dealer requirement are often "neophytes, investment-banker wanna-bes," says Sadick. But some violators are also experienced moneymen. The most famous: Michael Milken, who, even after he was barred from securities trading, negotiated a deal for which he received $42 million. In 1998 he was forced to give it all back with interest.

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