Private Company M&A Brokers Don’t Need to Register With the SEC as Broker-Dealers

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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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.

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