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M&A Broker Dealer Registration

On December 29, 2022, President Biden signed H.R. 2617, the Consolidated Appropriations Act, 2023 (“Appropriations Act”) into law.  As sometimes happens in these voluminous bills, a nugget affecting our industry is buried.  After about 2,600 pages of text we get to Title V – Small Business Mergers, Acquisitions, Sales and Brokerage Simplification.  This short provision codifies into law the broker-dealer registration requirements for entities effecting securities transactions in connection with the sale of equity control in private operating businesses (“M&A Broker”).  Previously the industry has been relying on a no-action letter issued by the SEC Division of Trading and Markets on January 31, 2014, for liability protection involving these transactions (see HERE).


Section 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”) requires securities brokers to register with the SEC and Section 15(b) prescribes the manner of registration. Section 3(a)(4) of the Exchange Act defines a “broker” as “any person engaged in the business of effecting transactions in securities for the account of others.”  Section 501 of the Appropriations Act amends Section 15(b) of the Exchange Act by adding new subsection (13) providing a registration exemption for merger and acquisition brokers.  New Section 15(b)(13) provides a general exemption registration by an M&A Broker subject to certain exclusions and disqualifications.

Section 15(b)(13) defines an M&A Broker as a broker, and any person associated with a broker, engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company, if the broker reasonably believes that:

  • Upon consummation of the transaction, any person acquiring the securities or assets of the eligible privately held company, acting alone or in concert: (a) will control the company or the business conducted with the assets of the company; and (b) directly or indirectly will be active in the management of the company or the business conducted with the assets. The statute provides examples of being active in management including: (aa) electing executive officers; (bb) approving the annual budget; (cc) serving as an executive or other manager; or (dd) carrying out such other activities that the SEC may determine in a separate rule; and
  • If any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent fiscal year-end financial statements of the company of the securities as customarily prepared by the management of the company in the normal course of operations and, if the financial statements of the company are audited, reviewed, or compiled, any related statement by the independent accountant, a balance sheet dated not more than 120 days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the financial statements, and material loss contingencies of the company.

The new statute is similar to the no-action letter with some buttoned-up language. One difference is that the no action letter specified that any security received by the broker would be restricted within the meaning of Rule 144.  The statutory version has no such limitation.

Another significant difference is that the new statutory exemption is limited to small businesses based on quantified EBITDA or gross earnings.  In particular, the M&A Broker exemption is available for transactions involving eligible privately held companies.  The statute defines an “eligible privately held company” as (i) a company that does not have any class of securities registered, or required to be registered with the SEC under Section 12 of the Exchange Act, or with respect to which the company files, or is required to file, periodic information, documents, or reports under Section 15(d) of the Exchange Act; and (ii)  in the fiscal year ending immediately before the year in which the services of the M&A Broker are initially engaged, the company meets either or both of the following conditions: (a) its EBITDA is less than $25,000,000; or (b) its gross revenues are less than $250,000,000.

The M&A Broker Exemption will be effective on March 29, 2023.

Small Business Mergers, Acquisitions, Sales and Brokerage Simplification

New Section 15(b)(13)(A) exempts an M&A Broker from registration subject to the exclusions found in Section 15(b)(13)(B) and the disqualifications in Section 15(b)(13)(C).

Exclusions to M&A Exemption

In accordance with Section 15(b)(13)(B), the M&A Broker registration exemption is not available if the broker does any of the following:

  • Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction.
  • Engages, on behalf of a company, in a public offering of any class of securities that is registered, or is required to be registered, with the SEC under Exchange Act Section 12 or with respect to which the company files, or is required to file, periodic information, documents, and reports with the SEC (I note the “files, or is required to file includes voluntary filers”).
  • Engages on behalf of any party in a transaction involving a shell company, other than a business combination shell company. A shell company is defined the same as in Securities Act Rule 405 including any company that (i) has no or nominal operations; and (ii) has no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.  A business combination shell company is also defined the same as in Securities Act Rule 405 as a shell company that (i) is formed by an entity that is not a shell company solely for the purpose of changing the state of corporate domicile within the U.S.; or (ii) is formed by an entity that is not a shell company solely for completing a business combination transaction where none of the parties is a shell company (such as in a triangular merger).
  • Directly or indirectly provides financing related to the transfer of ownership of an eligible privately held company.
  • Directly, or indirectly through any of its affiliates, provides financing related to the transfer of ownership of an eligible privately held company.
  • Assists any party to obtain financing form an unaffiliated third party without (a) complying with all applicable laws including Regulation T (regarding extension of credit by broker-dealers); and (b) disclosing any compensation in writing to the party.
  • Represents both the buyer and the seller in the same transaction without providing clear written disclosure as to the parties the broker represents and obtaining written consent from both parties to the joint representation.
  • Facilitates a transaction with a group of buyers formed with the assistance of the M&A broker to acquire the eligible privately held company.
  • Engages in a transaction involving the transfer of ownership of an eligible privately held company to a passive buyer or group of passive buyers. A passive buyer is one that does not exercise control over the company.  Control means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. There is a presumption of control if, upon completion of a transaction, the buyer or group of buyers: (a) has the right to vote or direct the sale of 25% or more of the securities; or (b) in the case of a partnership of limited liability company, has the right to receive upon dissolution, or has contributed, 25% or more of the capital.
  • Binds a party to a transfer of ownership of an eligible privately held company.


Section 15(b)(13)(C) codifies the same disqualifications as the prior SEC no-action letter, and in particular, an M&A Broker is disqualified if such broker, or any of its officers, directors, members, managers, partners or employees: (i) has been barred from association with a broker-dealer by the SEC or any state or any self-regulatory organization; or (ii) is suspended from association with a broker-dealer.

The Author

Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm

Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony L.G., PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALG legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.

Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including siting on the board of directors of the American Red Cross for Palm Beach and Martin Counties, and providing financial support to the Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others. She is also a financial and hands-on supporter of Palm Beach Day Academy, one of Palm Beach’s oldest and most respected educational institutions. She currently resides in Palm Beach with her husband and daughter.

Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.

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