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[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>
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