M&A Brokers: Don’t Forget State Laws


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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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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