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Union Calendar No. 243 

113TH CONGRESS 

2D SESSION H. R. 2274 

[Report No. 113–326] 

To amend the Securities Exchange Act of 1934 to provide for a noticefiling 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 

JANUARY 14, 2014 

Additional sponsors: Mr. HECK of Nevada, Mr. SCHWEIKERT, Mr. FINCHER, 

Mr. ROSS, Mr. MCHENRY, Mr. LUCAS, and Ms. LOFGREN

JANUARY 14, 2014 

Reported with amendments, committed to the Committee of the Whole House 

on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on June 6, 2013] 


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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. 


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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Mergers, 

5 Acquisitions, Sales, and Brokerage Simplification Act of 

6 2013’’. 

7 SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND AC8 QUISITION BROKERS. 

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

10 (15 U.S.C. 78o(b)) is amended by adding at the end the 

11 following: 

12 ‘‘(13) REGISTRATION EXEMPTION FOR MERGER

13 AND ACQUISITION BROKERS.— 

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

15 subparagraph (B), an M&A broker and any per16 son associated with an M&A broker shall be ex17 empt from registration under this section. 

18 ‘‘(B) EXCLUDED ACTIVITIES.—An M&A 

19 broker or a person associated with an M&A 

20 broker is not exempt from registration under this 

21 paragraph if such broker or associated person 

22 does any of the following: 

23 ‘‘(i) Directly or indirectly, in connec24 tion with the transfer of ownership of an el25 igible privately held company, receives, 


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1 holds, transmits, or has custody of the funds 

2 or securities to be exchanged by the parties 

3 to the transaction. 

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

5 a public offering of any class of securities 

6 that is registered, or is required to be reg7 istered, with the Commission under section 

8 12 or with respect to which the issuer files, 

9 or is required to file, periodic information, 

10 documents, and reports under subsection 

11 (d). 

12 ‘‘(C) RULE OF CONSTRUCTION.—Nothing in 

13 this paragraph shall be construed to limit any 

14 other authority of the Commission to exempt any 

15 person, or any class of persons, from any provi16 sion of this title, or from any provision of any 

17 rule or regulation thereunder. 

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

19 ‘‘(i) CONTROL.—The term ‘control’ 

20 means the power, directly or indirectly, to 

21 direct the management or policies of a com22 pany, whether through ownership of securi23 ties, by contract, or otherwise. There is a 

24 presumption of control for any person 

25 who— 


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1 ‘‘(I) is a director, general partner, 

2 member or manager of a limited liabil3 ity company, or officer exercising exec4 utive responsibility (or has similar sta5 tus or functions); 

6 ‘‘(II) has the right to vote 20 per7 cent or more of a class of voting securi8 ties or the power to sell or direct the 

9 sale of 20 percent or more of a class of 

10 voting securities; or 

11 ‘‘(III) in the case of a partnership 

12 or limited liability company, has the 

13 right to receive upon dissolution, or 

14 has contributed, 20 percent or more of 

15 the capital. 

16 ‘‘(ii) ELIGIBLE PRIVATELY HELD COM17 PANY.—The term ‘eligible privately held 

18 company’ means a company that meets both 

19 of the following conditions: 

20 ‘‘(I) The company does not have 

21 any class of securities registered, or re22 quired to be registered, with the Com23 mission under section 12 or with re24 spect to which the company files, or is 

25 required to file, periodic information, 


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1 documents, and reports under sub2 section (d). 

3 ‘‘(II) In the fiscal year ending im4 mediately before the fiscal year in 

5 which the services of the M&A broker 

6 are initially engaged with respect to 

7 the securities transaction, the company 

8 meets either or both of the following 

9 conditions (determined in accordance 

10 with the historical financial account11 ing records of the company): 

12 ‘‘(aa) The earnings of the 

13 company before interest, taxes, de14 preciation, and amortization are 

15 less than $25,000,000. 

16 ‘‘(bb) The gross revenues of 

17 the company are less than 

18 $250,000,000. 

19 ‘‘(iii) M&A BROKER.—The term ‘M&A 

20 broker’ means a broker engaged in the busi21 ness of effecting securities transactions sole22 ly in connection with the transfer of owner23 ship of an eligible privately held company, 

24 regardless of whether the broker acts on be25 half of a seller or buyer, through the purVerDate Mar 15 2010 21:55 Jan 14, 2014 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H2274.RH H2274

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1 chase, sale, exchange, issuance, repurchase, 

2 or redemption of, or a business combination 

3 involving, securities or assets of the eligible 

4 privately held company, if the broker rea5 sonably believes that— 

6 ‘‘(I) upon consummation of the 

7 transaction, any person acquiring se8 curities or assets of the eligible pri9 vately held company, acting alone or 

10 in concert, will control and, directly or 

11 indirectly, will be active in the man12 agement of the eligible privately held 

13 company or the business conducted 

14 with the assets of the eligible privately 

15 held company; and 

16 ‘‘(II) if any person is offered secu17 rities in exchange for securities or as18 sets of the eligible privately held com19 pany, such person will, prior to becom20 ing legally bound to consummate the 

21 transaction, receive or have reasonable 

22 access to the most recent year-end bal23 ance sheet, income statement, statement 

24 of changes in financial position, and 

25 statement of owner’s equity of the 


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1 issuer of the securities offered in ex2 change, and, if the financial statements 

3 of the issuer are audited, the related re4 port of the independent auditor, a bal5 ance sheet dated not more than 120 

6 days before the date of the offer, and 

7 information pertaining to the manage8 ment, business, results of operations for 

9 the period covered by the foregoing fi10 nancial statements, and material loss 

11 contingencies of the issuer. 

12 ‘‘(E) INFLATION ADJUSTMENT.— 

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

14 5 years after the date of the enactment of 

15 the Small Business Mergers, Acquisitions, 

16 Sales, and Brokerage Simplification Act of 

17 2013, and every 5 years thereafter, each dol18 lar amount in subparagraph (D)(ii)(II) 

19 shall be adjusted by— 

20 ‘‘(I) dividing the annual value of 

21 the Employment Cost Index For Wages 

22 and Salaries, Private Industry Work23 ers (or any successor index), as pub24 lished by the Bureau of Labor Statis25 tics, for the calendar year preceding 


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1 the calendar year in which the adjust2 ment is being made by the annual 

3 value of such index (or successor) for 

4 the calendar year ending December 31, 

5 2012; and 

6 ‘‘(II) multiplying such dollar 

7 amount by the quotient obtained under 

8 subclause (I). 

9 ‘‘(ii) ROUNDING.—Each dollar amount 

10 determined under clause (i) shall be round11 ed to the nearest multiple of $100,000.’’. 

12 SEC. 3. EFFECTIVE DATE. 

13 This Act and any amendment made by this Act shall 

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

15 enactment of this Act. 

Amend the title so as to read: ‘‘A bill 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.’’. 


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Union Calendar No. 243 

113TH CONGRESS 

2D SESSION H. R. 2274 

[Report No. 113–326] 

A BILL 

To amend the Securities Exchange Act of 1934 to 

tivities of such brokers. tion appropriate to the limited scope of the acvately held companies and to provide for regulawith the transfer of ownership of smaller prifor brokers performing services in connection provide for a notice-filing registration procedure 

JANUARY 14, 2014 

Reported with amendments, committed to the Committee 

dered to be printed of the Whole House on the State of the Union, and orVerDate Mar 15 2010 21:55 Jan 14, 2014 Jkt 039200 PO 00000 Frm 00010 Fmt 6651 Sfmt 6651 E:\BILLS\H2274.RH H2274

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