On January 31, 2014, the SEC issued a ground-breaking no-action letter, taking the position that a financial intermediary that limits its business activity to advising privately held companies in M&A transactions need not register as a broker-dealer. The no-action letter, as revised on February 4, 2014, may be found here: http://www.sec.gov/divisions/marketreg/mr-noaction/2014/ma-brokers-013114.pdf.
This no-action letter departs from the SEC’s long-standing position that treated M&A brokers in the same manner as more traditional broker-dealers. It also opens the door for brokers who only represent private companies in M&A transactions to withdraw their broker-dealer registration with the SEC. Before doing so, however, they should consider both the limitations in the no-action letter and the implications under state law should they cease to be an SEC-registered broker-dealer.
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