On January 31, 2014, the Staff of the Securities and Exchange Commission (the “SEC”) granted no-action relief permitting certain business brokers to facilitate the sale of privately-held companies and receive transaction-based compensation without registering as a broker-dealer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In the letter, the term “M&A Broker” is specifically defined as a person engaged in the business of effecting securities transactions solely in connection with the transfer of ownership and control of a “privately-held company” through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company. In general, a “privately-held company,” for purposes of the letter, is any non-SEC reporting company.
The Staff’s position specifically permits the M&A Broker to advertise the privately-held company for sale; assess the value of any securities being sold; participate in negotiations for the transaction; advise the buyer and seller to issue securities; and, most importantly, receive transaction-based compensation. But there are a number of applicable conditions, including, among others...
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