Pending Legislation Offers M&A Advisers Relief From Broker-Dealer Rules

A bill pending in the House of Representatives (H.R. 2274) would provide some relief for M&A advisers from the broker-dealer registration rules.  The bill would permit the sale of privately held businesses that have EBITDA of less than $25,000,000 or gross revenues of less than $250,000,000.  Other requirements include the buyer (alone or in concert) must control the business after the transaction and the buyer must be provided certain financial and business information.

The crowdfunders will smile because the bill directs the SEC to issue implementing regulations within 180 days after enactment.

It may not be complete regulation lite, however, because the bill incorporates a host of provisions of the Exchange Act applicable to broker-dealers – See Section 2(a)(13)(G).

Perhaps the most problematic provision, which may render the entire thing useless, is the bill directs the SEC to “codify the interpretative guidance issued by the staff of the Commission in the no-action letter to International Business Exchange Corporation dated December 12, 1986, and in the no-action letter to Country Business, Inc., dated November 8, 23 2006, with respect to circumstances under which registration as a broker under this section is not required.”

In International Business Exchange Corporation, the SEC conditioned no action relief only if IBEC has a limited role in negotiations between the purchaser and seller.  IBEC had represented to the SEC that it’s activities included “Assisting in the negotiations, to some degree, between buyer and seller. (Transmitting Documents Between Parties).”

In Country Business, Inc. the SEC conditioned its no action position as follows: “if a decision is made to effect the transaction by a sale of securities, CBI will have a limited role in negotiations between the seller and potential purchasers or their representatives as described in your letter and will not have the power to bind either party in the transaction.”  The letter described the following:  “CBI’s role will be limited to the following: (1) transmitting documents between the parties; (2) valuing the assets of the business as a going concern; (3) providing the seller with administrative support; and (4) assisting the seller with preparation of financial statements.”

If you want to learn more about dealing with unregistered broker-dealers and the potential hazards, see Part VI of our publication JOBS Act and Other Securities Law Essentials for Growing Companies.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Stinson Leonard Street - Dodd-Frank and the Jobs Act | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.