Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2014 - Amends the Securities Exchange Act of 1934 to exempt from its registration requirements certain merger and acquisition (M&A) brokers and associated persons.
Denies such registration exemption, however, to brokers who: (1) receive, hold, transmit, or have custody of any funds or securities to be exchanged by parties to a transfer of ownership of an eligible privately held company; or (2) engage on behalf of an issuer in a public offering of securities that are either subject to mandatory registration, or with respect to which the issuer must file periodic information, documents, and reports.
Prohibits the construction of this Act to limit any other authority of the Securities and Exchange Commission (SEC) to exempt any person, or any class of persons, from any provision of this Act, including any related rule or regulation.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2274 Introduced in House (IH)]
113th CONGRESS
1st Session
H. R. 2274
To amend the Securities Exchange Act of 1934 to provide for a notice-
filing registration procedure for brokers performing services in
connection with the transfer of ownership of smaller privately held
companies and to provide for regulation appropriate to the limited
scope of the activities of such brokers.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 6, 2013
Mr. Huizenga of Michigan (for himself, Mr. Higgins, and Mr. Posey)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to provide for a notice-
filing registration procedure for brokers performing services in
connection with the transfer of ownership of smaller privately held
companies and to provide for regulation appropriate to the limited
scope of the activities of such brokers.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Mergers,
Acquisitions, Sales, and Brokerage Simplification Act of 2013''.
SEC. 2. MERGER AND ACQUISITION BROKERS.
(a) In General.--Section 15(b) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(b)) is amended by adding at the end the following:
``(13) Merger and acquisition brokers.--
``(A) Registration by notice-filing.--
Notwithstanding paragraphs (1) and (2), an M&A broker
may register for purposes of this section by filing
with the Commission an electronic notice in such form
and containing such information concerning the M&A
broker and any persons associated with the M&A broker
as the Commission may by rule prescribe as necessary or
appropriate in the public interest or for the
protection of investors.
``(B) Effectiveness of registration.--
``(i) Immediate.--Except as provided in
clause (ii), the registration of an M&A broker
under subparagraph (A) shall become effective
upon receipt by the Commission of a properly
completed notice from the M&A broker under such
subparagraph.
``(ii) Commission approval required.--The
registration of an M&A broker under
subparagraph (A) shall not become effective
without approval by the Commission if the M&A
broker or a person associated with the M&A
broker is subject to--
``(I) suspension or revocation of
registration under paragraph (4);
``(II) a statutory disqualification
(except that the date of the filing of
the notice under subparagraph (A) shall
be substituted for the date referred to
in section 3(a)(39)(F)); or
``(III) disqualification under the
rules adopted by the Commission under
section 926 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (15 U.S.C. 77d note) (except that
the date of the filing of the notice
under subparagraph (A) shall be
substituted for the date referred to in
paragraph (2)(A)(ii) of such section).
``(C) Updated information.--If the information
contained in a notice filed under subparagraph (A)
becomes inaccurate or incomplete in any material
respect, the M&A broker shall update such information
in a form and manner to be specified by the Commission.
``(D) Public availability.--The Commission shall
make publicly available on the website of the
Commission the information provided in a notice filed
under subparagraph (A), as updated under subparagraph
(C).
``(E) Disclosure to clients.--The Commission may
require an M&A broker registered under subparagraph (A)
to deliver to the clients of the M&A broker a
disclosure document describing the M&A broker and the
affiliates, associated persons, services, and fees of
the M&A broker, any conflicts of interest of the M&A
broker, and such other information as the Commission
considers necessary or appropriate in the public
interest or for the protection of investors.
``(F) Exemptions for m&a brokers.--To the extent
that the activities of an M&A broker registered under
subparagraph (A) are within the scope of the activities
described in subparagraph (K)(iii), the M&A broker (and
any persons associated with the M&A broker) shall be
exempt from--
``(i) except as provided in subparagraph
(G), the requirements of this Act that apply to
a broker registered, or required to be
registered, under this subsection (or to any
persons associated with such a broker, as the
case may be); and
``(ii) the Securities Investor Protection
Act of 1970 (15 U.S.C. 78aaa et seq.).
``(G) Provisions applicable to m&a brokers.--
``(i) In general.--The following provisions
shall apply to an M&A broker registered under
subparagraph (A) (or to any persons associated
with the M&A broker, as the case may be):
``(I) This paragraph and paragraphs
(4), (5), (6), and (7).
``(II) Subsection (a), paragraphs
(1)(A) and (3)(A) of subsection (c),
and subsection (g).
``(III) Subsections (a)(1) and
(b)(1) of section 17.
``(ii) Tailored application.--In applying
subsection (c)(3)(A) of this section and
subsections (a)(1) and (b)(1) of section 17 to
M&A brokers, the Commission shall take into
account the nature of the transactions in which
M&A brokers are involved, the involvement of
the parties to such transactions in such
transactions, and the limited scope of the
activities of M&A brokers under subparagraph
(K)(iii), including that M&A brokers do not
have custody of the funds or securities to be
exchanged by the parties to such transactions.
``(iii) State law preemption.--Subsection
(i)(1) shall govern the relationship between
the requirements applicable to M&A brokers
under this Act and the requirements applicable
to M&A brokers under the law of a State or a
political subdivision of a State. Except as
provided in such subsection, this paragraph
shall not preempt the law of a State or a
political subdivision of a State applicable to
M&A brokers.
``(H) Excluded activities.--An M&A broker may not
in reliance on this paragraph do any of the following:
``(i) Directly or indirectly, in connection
with the transfer of ownership of an eligible
privately held company, receive, hold,
transmit, or have custody of the funds or
securities to be exchanged by the parties to
the transaction.
``(ii) Engage on behalf of an issuer in a
public offering of any class of securities that
is registered, or is required to be registered,
with the Commission under section 12 or with
respect to which the issuer files, or is
required to file, periodic information,
documents, and reports under section 15(d).
``(I) Coordination with the states.--In
establishing appropriate uniform and consistent
standards of training, experience, competence, and
other qualifications under paragraph (7) for persons
associated with an M&A broker, and in prescribing the
form and content of the notice described in
subparagraph (A), the Commission shall cooperate,
coordinate, and share information with any association
composed of duly constituted representatives of State
governments the primary assignment of which is the
regulation of the securities business within such
States.
``(J) Regulations.--Not later than 180 days after
the date of the enactment of this paragraph, the
Commission shall promulgate regulations to--
``(i) implement and enforce this paragraph;
and
``(ii) 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, 2006, with
respect to circumstances under which
registration as a broker under this section is
not required.
``(K) Definitions.--In this paragraph:
``(i) Control.--The term `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 for any person who--
``(I) is a director, general
partner, member or manager of a limited
liability company, or officer
exercising executive responsibility (or
has similar status or functions);
``(II) has the right to vote 25
percent or more of a class of voting
securities or the power to sell or
direct the sale of 25 percent or more
of a class of voting securities; or
``(III) in the case of a
partnership or limited liability
company, has the right to receive upon
dissolution, or has contributed, 25
percent or more of the capital.
``(ii) Eligible privately held company.--
The term `eligible privately held company'
means a company that meets both of the
following conditions:
``(I) The company does not have any
class of securities registered, or
required to be registered, with the
Commission under section 12 or with
respect to which the company files, or
is required to file, periodic
information, documents, and reports
under section 15(d).
``(II) In the fiscal year ending
immediately before the fiscal year in
which the services of the M&A broker
are initially engaged with respect to
the securities transaction, the company
meets either or both of the following
conditions (determined in accordance
with the historical financial
accounting records of the company):
``(aa) The earnings of the
company before interest, taxes,
depreciation, and amortization
are less than $25,000,000.
``(bb) The gross revenues
of the company are less than
$250,000,000.
``(iii) M&A broker.--The term `M&A broker'
means a broker engaged in the business of
effecting 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--
``(I) upon consummation of the
transaction, any person acquiring
securities or assets of the eligible
privately held company, acting alone or
in concert, will control and, directly
or indirectly, will be active in the
management of the eligible privately
held company or the business conducted
with the assets of the eligible
privately held company; and
``(II) 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
year-end balance sheet, income
statement, statement of changes in
financial position, and statement of
owner's equity of the issuer of the
securities offered in exchange, and, if
the financial statements of the issuer
are audited, the related report of the
independent auditor, 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 foregoing financial
statements, and material loss
contingencies of the issuer.
``(L) Inflation adjustment.--
``(i) In general.--On the date that is 5
years after the Commission first promulgates
final regulations under subparagraph (J), and
every 5 years thereafter, each dollar amount in
subparagraph (K)(ii)(II) shall be adjusted by--
``(I) dividing the annual value of
the Employment Cost Index For Wages and
Salaries, Private Industry Workers (or
any successor index), as published by
the Bureau of Labor Statistics, for the
calendar year preceding the calendar
year in which the adjustment is being
made by the annual value of such index
(or successor) for the calendar year
ending December 31, 2012; and
``(II) multiplying such dollar
amount by the quotient obtained under
subclause (I).
``(ii) Rounding.--Each dollar amount
determined under clause (i) shall be rounded to
the nearest multiple of $100,000.''.
(b) Effective Date.--Paragraph (13) of section 15(b) of the
Securities Exchange Act of 1934, as added by subsection (a), except
subparagraph (J) of such paragraph, shall take effect on the date that
is 180 days after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Hearings Held by the Subcommittee on Capital Markets and Government Sponsored Enterprises Prior to Referral.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 57 - 0.
Reported (Amended) by the Committee on Financial Services. H. Rept. 113-326.
Reported (Amended) by the Committee on Financial Services. H. Rept. 113-326.
Placed on the Union Calendar, Calendar No. 243.
Mr. Garrett moved to suspend the rules and pass the bill, as amended. (consideration: CR H192)
Considered under suspension of the rules. (consideration: CR H192-196)
DEBATE - The House proceeded with forty minutes of debate on H.R. 2274.
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At the conclusion of debate, the Yeas and Nays were demanded and ordered. Pursuant to the provisions of clause 8, rule XX, the Chair announced that further proceedings on the motion would be postponed.
Considered as unfinished business. (consideration: CR H198-199)
Passed/agreed to in House: On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 422 - 0 (Roll no. 14).(text: CR H192-193)
Roll Call #14 (House)On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 422 - 0 (Roll no. 14). (text: CR H192-193)
Roll Call #14 (House)The title of the measure was amended. Agreed to without objection.
Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.