IIB 

113TH CONGRESS 

2D SESSION H. R. 2274 

IN THE SENATE OF THE UNITED STATES 

JANUARY 15, 2014 

Received; read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

AN ACT 

To amend the Securities Exchange Act of 1934 to exempt 

from registration brokers performing services in connection with the transfer of ownership of smaller privately 

held companies. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Small Business Merg3 ers, Acquisitions, Sales, and Brokerage Simplification Act 

4 of 2014’’. 

5 SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND AC6 QUISITION BROKERS. 

7 Section 15(b) of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78o(b)) is amended by adding at the end the 

9 following: 

10 ‘‘(13) REGISTRATION EXEMPTION FOR MERGER

11 AND ACQUISITION BROKERS.— 

12 ‘‘(A) IN GENERAL.—Except as provided in 

13 subparagraph (B), an M&A broker shall be ex14 empt from registration under this section. 

15 ‘‘(B) EXCLUDED ACTIVITIES.—An M&A 

16 broker is not exempt from registration under 

17 this paragraph if such broker does any of the 

18 following: 

19 ‘‘(i) Directly or indirectly, in connec20 tion with the transfer of ownership of an 

21 eligible privately held company, receives, 

22 holds, transmits, or has custody of the 

23 funds or securities to be exchanged by the 

24 parties to the transaction. 

25 ‘‘(ii) Engages on behalf of an issuer in 

26 a public offering of any class of securities 


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1 that is registered, or is required to be reg2 istered, with the Commission under section 

3 12 or with respect to which the issuer files, 

4 or is required to file, periodic information, 

5 documents, and reports under subsection 

6 (d). 

7 ‘‘(C) RULE OF CONSTRUCTION.—Nothing 

8 in this paragraph shall be construed to limit 

9 any other authority of the Commission to ex10 empt any person, or any class of persons, from 

11 any provision of this title, or from any provision 

12 of any rule or regulation thereunder. 

13 ‘‘(D) DEFINITIONS.—In this paragraph: 

14 ‘‘(i) CONTROL.—The term ‘control’ 

15 means the power, directly or indirectly, to 

16 direct the management or policies of a 

17 company, whether through ownership of 

18 securities, by contract, or otherwise. There 

19 is a presumption of control for any person 

20 who— 

21 ‘‘(I) is a director, general part22 ner, member or manager of a limited 

23 liability company, or officer exercising 

24 executive responsibility (or has similar 

25 status or functions); 


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1 ‘‘(II) has the right to vote 20 

2 percent or more of a class of voting 

3 securities or the power to sell or direct 

4 the sale of 20 percent or more of a 

5 class of voting securities; or 

6 ‘‘(III) in the case of a partner7 ship or limited liability company, has 

8 the right to receive upon dissolution, 

9 or has contributed, 20 percent or 

10 more of the capital. 

11 ‘‘(ii) ELIGIBLE PRIVATELY HELD

12 COMPANY.—The term ‘eligible privately 

13 held company’ means a company that 

14 meets both of the following conditions: 

15 ‘‘(I) The company does not have 

16 any class of securities registered, or 

17 required to be registered, with the 

18 Commission under section 12 or with 

19 respect to which the company files, or 

20 is required to file, periodic informa21 tion, documents, and reports under 

22 subsection (d). 

23 ‘‘(II) In the fiscal year ending 

24 immediately before the fiscal year in 

25 which the services of the M&A broker 


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1 are initially engaged with respect to 

2 the securities transaction, the com3 pany meets either or both of the fol4 lowing conditions (determined in ac5 cordance with the historical financial 

6 accounting records of the company): 

7 ‘‘(aa) The earnings of the 

8 company before interest, taxes, 

9 depreciation, and amortization 

10 are less than $25,000,000. 

11 ‘‘(bb) The gross revenues of 

12 the company are less than 

13 $250,000,000. 

14 ‘‘(iii) M&A BROKER.—The term ‘M&A 

15 broker’ means a broker, and any person 

16 associated with a broker, engaged in the 

17 business of effecting securities transactions 

18 solely in connection with the transfer of 

19 ownership of an eligible privately held com20 pany, regardless of whether the broker acts 

21 on behalf of a seller or buyer, through the 

22 purchase, sale, exchange, issuance, repur23 chase, or redemption of, or a business com24 bination involving, securities or assets of 


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1 the eligible privately held company, if the 

2 broker reasonably believes that— 

3 ‘‘(I) upon consummation of the 

4 transaction, any person acquiring se5 curities or assets of the eligible pri6 vately held company, acting alone or 

7 in concert, will control and, directly or 

8 indirectly, will be active in the man9 agement of the eligible privately held 

10 company or the business conducted 

11 with the assets of the eligible privately 

12 held company; and 

13 ‘‘(II) if any person is offered se14 curities in exchange for securities or 

15 assets of the eligible privately held 

16 company, such person will, prior to 

17 becoming legally bound to consum18 mate the transaction, receive or have 

19 reasonable access to the most recent 

20 year-end balance sheet, income state21 ment, statement of changes in finan22 cial position, and statement of owner’s 

23 equity of the issuer of the securities 

24 offered in exchange, and, if the finan25 cial statements of the issuer are auVerDate Mar 15 2010 22:32 Jan 15, 2014 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2274.RFS H2274

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1 dited, the related report of the inde2 pendent auditor, a balance sheet 

3 dated not more than 120 days before 

4 the date of the offer, and information 

5 pertaining to the management, busi6 ness, results of operations for the pe7 riod covered by the foregoing financial 

8 statements, and material loss contin9 gencies of the issuer. 

10 ‘‘(E) INFLATION ADJUSTMENT.— 

11 ‘‘(i) IN GENERAL.—On the date that 

12 is 5 years after the date of the enactment 

13 of the Small Business Mergers, Acquisi14 tions, Sales, and Brokerage Simplification 

15 Act of 2014, and every 5 years thereafter, 

16 each dollar amount in subparagraph 

17 (D)(ii)(II) shall be adjusted by— 

18 ‘‘(I) dividing the annual value of 

19 the Employment Cost Index For 

20 Wages and Salaries, Private Industry 

21 Workers (or any successor index), as 

22 published by the Bureau of Labor 

23 Statistics, for the calendar year pre24 ceding the calendar year in which the 

25 adjustment is being made by the anVerDate Mar 15 2010 22:32 Jan 15, 2014 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2274.RFS H2274

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1 nual value of such index (or suc2 cessor) for the calendar year ending 

3 December 31, 2012; and 

4 ‘‘(II) multiplying such dollar 

5 amount by the quotient obtained 

6 under subclause (I). 

7 ‘‘(ii) ROUNDING.—Each dollar 

8 amount determined under clause (i) shall 

9 be rounded to the nearest multiple of 

10 $100,000.’’. 

11 SEC. 3. EFFECTIVE DATE. 

12 This Act and any amendment made by this Act shall 

13 take effect on the date that is 90 days after the date of 

14 the enactment of this Act. 

Passed the House of Representatives January 14, 

2014. 

Attest: KAREN L. HAAS, 

Clerk. 


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