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House Bill Seeks to Simplify SEC Registration for M&A Business Brokers

Tuesday, June 18, 2013
By Maria Lokshin

A bill recently introduced in the House calls for simpler registration with the Securities and Exchange Commission for brokers that facilitate mergers and acquisitions of private companies.

H.R. 2274, unveiled by Rep. Bill Huizenga (R-Mich.) June 6, would amend Section 15(b) of the 1934 Securities Exchange Act to allow such brokers to register with the SEC through a public notice filing. The bill aims to reduce “regulatory costs incurred by the buyers and sellers of smaller privately held companies that need to use professional business brokerage services,” Huizenga said in a statement e-mailed to BNA.

The bill would apply to brokers who facilitate M&A deals involving companies with annual earnings of less than $25 million and annual gross revenue of less than $250 million. According to an aide for Huizenga, M&A brokers are required to register as broker-dealers with the SEC and to be members of the Financial Industry Regulatory Authority. However, many such brokers, who simply negotiate the terms of M&A deals between small firms, are not even aware of the requirement.

Moreover, the costs of registration can be prohibitive, the aide said.

Costs Contemplated
According to the Michigan Republican, initial SEC registration costs for M&A brokers can run more than $150,000, with annual registration running as high as $75,000.

“Trillions of dollars worth of privately owned, main-street mom and pop type businesses will be sold or closed as baby boomers retire. Business brokers play a critical role in facilitating private business mergers, acquisitions, and sales of these main-street companies,” Huizenga said. “By simplifying the regulation and reducing the cost of these business brokerage services, these privately-owned companies would be able to safely, efficiently and effectively be able to sell their company while preserving and protecting jobs at these companies.”

Among other points, the legislation also calls for the SEC to tailor its rules for brokers involved in M&A transactions. The bill also would exempt such brokers from membership in and regulation by FINRA.

According to Huizenga's aide, the issue has been on the SEC's radar for several years.

The SEC and FINRA declined to comment on the measure.

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