I 

113TH CONGRESS 

1ST SESSION H. R. 2274 

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 

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. 

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 2013’’. 

5 SEC. 2. MERGER AND ACQUISITION BROKERS. 

6 (a) IN GENERAL.—Section 15(b) of the Securities 

7 Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by 

8 adding at the end the following: 

9 ‘‘(13) MERGER AND ACQUISITION BROKERS.— 

10 ‘‘(A) REGISTRATION BY NOTICE-FILING.— 

11 Notwithstanding paragraphs (1) and (2), an 

12 M&A broker may register for purposes of this 

13 section by filing with the Commission an elec14 tronic notice in such form and containing such 

15 information concerning the M&A broker and 

16 any persons associated with the M&A broker as 

17 the Commission may by rule prescribe as nec18 essary or appropriate in the public interest or 

19 for the protection of investors. 

20 ‘‘(B) EFFECTIVENESS OF REGISTRA21 TION.— 

22 ‘‘(i) IMMEDIATE.—Except as provided 

23 in clause (ii), the registration of an M&A 

24 broker under subparagraph (A) shall be25 come effective upon receipt by the Com26 mission of a properly completed notice 

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1 from the M&A broker under such subpara2 graph. 

3 ‘‘(ii) COMMISSION APPROVAL RE4 QUIRED.—The registration of an M&A 

5 broker under subparagraph (A) shall not 

6 become effective without approval by the 

7 Commission if the M&A broker or a person 

8 associated with the M&A broker is subject 

9 to— 

10 ‘‘(I) suspension or revocation of 

11 registration under paragraph (4); 

12 ‘‘(II) a statutory disqualification 

13 (except that the date of the filing of 

14 the notice under subparagraph (A) 

15 shall be substituted for the date re16 ferred to in section 3(a)(39)(F)); or 

17 ‘‘(III) disqualification under the 

18 rules adopted by the Commission 

19 under section 926 of the Dodd-Frank 

20 Wall Street Reform and Consumer 

21 Protection Act (15 U.S.C. 77d note) 

22 (except that the date of the filing of 

23 the notice under subparagraph (A) 

24 shall be substituted for the date remstockstill on DSK4VPTVN1PROD with BILLS

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1 ferred to in paragraph (2)(A)(ii) of 

2 such section). 

3 ‘‘(C) UPDATED INFORMATION.—If the in4 formation contained in a notice filed under sub5 paragraph (A) becomes inaccurate or incom6 plete in any material respect, the M&A broker 

7 shall update such information in a form and 

8 manner to be specified by the Commission. 

9 ‘‘(D) PUBLIC AVAILABILITY.—The Com10 mission shall make publicly available on the 

11 website of the Commission the information pro12 vided in a notice filed under subparagraph (A), 

13 as updated under subparagraph (C). 

14 ‘‘(E) DISCLOSURE TO CLIENTS.—The 

15 Commission may require an M&A broker reg16 istered under subparagraph (A) to deliver to 

17 the clients of the M&A broker a disclosure doc18 ument describing the M&A broker and the af19 filiates, associated persons, services, and fees of 

20 the M&A broker, any conflicts of interest of the 

21 M&A broker, and such other information as the 

22 Commission considers necessary or appropriate 

23 in the public interest or for the protection of in24 vestors. 

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1 ‘‘(F) EXEMPTIONS FOR M&A BROKERS.— 

2 To the extent that the activities of an M&A 

3 broker registered under subparagraph (A) are 

4 within the scope of the activities described in 

5 subparagraph (K)(iii), the M&A broker (and 

6 any persons associated with the M&A broker) 

7 shall be exempt from— 

8 ‘‘(i) except as provided in subpara9 graph (G), the requirements of this Act 

10 that apply to a broker registered, or re11 quired to be registered, under this sub12 section (or to any persons associated with 

13 such a broker, as the case may be); and 

14 ‘‘(ii) the Securities Investor Protection 

15 Act of 1970 (15 U.S.C. 78aaa et seq.). 

16 ‘‘(G) PROVISIONS APPLICABLE TO M&A

17 BROKERS.— 

18 ‘‘(i) IN GENERAL.—The following pro19 visions shall apply to an M&A broker reg20 istered under subparagraph (A) (or to any 

21 persons associated with the M&A broker, 

22 as the case may be): 

23 ‘‘(I) This paragraph and para24 graphs (4), (5), (6), and (7). 

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1 ‘‘(II) Subsection (a), paragraphs 

2 (1)(A) and (3)(A) of subsection (c), 

3 and subsection (g). 

4 ‘‘(III) Subsections (a)(1) and 

5 (b)(1) of section 17. 

6 ‘‘(ii) TAILORED APPLICATION.—In ap7 plying subsection (c)(3)(A) of this section 

8 and subsections (a)(1) and (b)(1) of sec9 tion 17 to M&A brokers, the Commission 

10 shall take into account the nature of the 

11 transactions in which M&A brokers are in12 volved, the involvement of the parties to 

13 such transactions in such transactions, and 

14 the limited scope of the activities of M&A 

15 brokers under subparagraph (K)(iii), in16 cluding that M&A brokers do not have cus17 tody of the funds or securities to be ex18 changed by the parties to such trans19 actions. 

20 ‘‘(iii) STATE LAW PREEMPTION.— 

21 Subsection (i)(1) shall govern the relation22 ship between the requirements applicable 

23 to M&A brokers under this Act and the re24 quirements applicable to M&A brokers 

25 under the law of a State or a political submstockstill on DSK4VPTVN1PROD with BILLS

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1 division of a State. Except as provided in 

2 such subsection, this paragraph shall not 

3 preempt the law of a State or a political 

4 subdivision of a State applicable to M&A 

5 brokers. 

6 ‘‘(H) EXCLUDED ACTIVITIES.—An M&A 

7 broker may not in reliance on this paragraph do 

8 any of the following: 

9 ‘‘(i) Directly or indirectly, in connec10 tion with the transfer of ownership of an 

11 eligible privately held company, receive, 

12 hold, transmit, or have custody of the 

13 funds or securities to be exchanged by the 

14 parties to the transaction. 

15 ‘‘(ii) Engage on behalf of an issuer in 

16 a public offering of any class of securities 

17 that is registered, or is required to be reg18 istered, with the Commission under section 

19 12 or with respect to which the issuer files, 

20 or is required to file, periodic information, 

21 documents, and reports under section 

22 15(d). 

23 ‘‘(I) COORDINATION WITH THE STATES.— 

24 In establishing appropriate uniform and con25 sistent standards of training, experience, commstockstill on DSK4VPTVN1PROD with BILLS

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1 petence, and other qualifications under para2 graph (7) for persons associated with an M&A 

3 broker, and in prescribing the form and content 

4 of the notice described in subparagraph (A), the 

5 Commission shall cooperate, coordinate, and 

6 share information with any association com7 posed of duly constituted representatives of 

8 State governments the primary assignment of 

9 which is the regulation of the securities busi10 ness within such States. 

11 ‘‘(J) REGULATIONS.—Not later than 180 

12 days after the date of the enactment of this 

13 paragraph, the Commission shall promulgate 

14 regulations to— 

15 ‘‘(i) implement and enforce this para16 graph; and 

17 ‘‘(ii) codify the interpretative guidance 

18 issued by the staff of the Commission in 

19 the no-action letter to International Busi20 ness Exchange Corporation dated Decem21 ber 12, 1986, and in the no-action letter to 

22 Country Business, Inc., dated November 8, 

23 2006, with respect to circumstances under 

24 which registration as a broker under this 

25 section is not required. 

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1 ‘‘(K) DEFINITIONS.—In this paragraph: 

2 ‘‘(i) CONTROL.—The term ‘control’ 

3 means the power, directly or indirectly, to 

4 direct the management or policies of a 

5 company, whether through ownership of 

6 securities, by contract, or otherwise. There 

7 is a presumption of control for any person 

8 who— 

9 ‘‘(I) is a director, general part10 ner, member or manager of a limited 

11 liability company, or officer exercising 

12 executive responsibility (or has similar 

13 status or functions); 

14 ‘‘(II) has the right to vote 25 

15 percent or more of a class of voting 

16 securities or the power to sell or direct 

17 the sale of 25 percent or more of a 

18 class of voting securities; or 

19 ‘‘(III) in the case of a partner20 ship or limited liability company, has 

21 the right to receive upon dissolution, 

22 or has contributed, 25 percent or 

23 more of the capital. 

24 ‘‘(ii) ELIGIBLE PRIVATELY HELD

25 COMPANY.—The term ‘eligible privately 

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1 held company’ means a company that 

2 meets both of the following conditions: 

3 ‘‘(I) The company does not have 

4 any class of securities registered, or 

5 required to be registered, with the 

6 Commission under section 12 or with 

7 respect to which the company files, or 

8 is required to file, periodic informa9 tion, documents, and reports under 

10 section 15(d). 

11 ‘‘(II) In the fiscal year ending 

12 immediately before the fiscal year in 

13 which the services of the M&A broker 

14 are initially engaged with respect to 

15 the securities transaction, the com16 pany meets either or both of the fol17 lowing conditions (determined in ac18 cordance with the historical financial 

19 accounting records of the company): 

20 ‘‘(aa) The earnings of the 

21 company before interest, taxes, 

22 depreciation, and amortization 

23 are less than $25,000,000. 

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1 ‘‘(bb) The gross revenues of 

2 the company are less than 

3 $250,000,000. 

4 ‘‘(iii) M&A BROKER.—The term ‘M&A 

5 broker’ means a broker engaged in the 

6 business of effecting the transfer of owner7 ship of an eligible privately held company, 

8 regardless of whether the broker acts on 

9 behalf of a seller or buyer, through the 

10 purchase, sale, exchange, issuance, repur11 chase, or redemption of, or a business com12 bination involving, securities or assets of 

13 the eligible privately held company, if the 

14 broker reasonably believes that— 

15 ‘‘(I) upon consummation of the 

16 transaction, any person acquiring se17 curities or assets of the eligible pri18 vately held company, acting alone or 

19 in concert, will control and, directly or 

20 indirectly, will be active in the man21 agement of the eligible privately held 

22 company or the business conducted 

23 with the assets of the eligible privately 

24 held company; and 

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1 ‘‘(II) if any person is offered se2 curities in exchange for securities or 

3 assets of the eligible privately held 

4 company, such person will, prior to 

5 becoming legally bound to consum6 mate the transaction, receive or have 

7 reasonable access to the most recent 

8 year-end balance sheet, income state9 ment, statement of changes in finan10 cial position, and statement of owner’s 

11 equity of the issuer of the securities 

12 offered in exchange, and, if the finan13 cial statements of the issuer are au14 dited, the related report of the inde15 pendent auditor, a balance sheet 

16 dated not more than 120 days before 

17 the date of the offer, and information 

18 pertaining to the management, busi19 ness, results of operations for the pe20 riod covered by the foregoing financial 

21 statements, and material loss contin22 gencies of the issuer. 

23 ‘‘(L) INFLATION ADJUSTMENT.— 

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

25 is 5 years after the Commission first promstockstill on DSK4VPTVN1PROD with BILLS

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1 mulgates final regulations under subpara2 graph (J), and every 5 years thereafter, 

3 each dollar amount in subparagraph 

4 (K)(ii)(II) shall be adjusted by— 

5 ‘‘(I) dividing the annual value of 

6 the Employment Cost Index For 

7 Wages and Salaries, Private Industry 

8 Workers (or any successor index), as 

9 published by the Bureau of Labor 

10 Statistics, for the calendar year pre11 ceding the calendar year in which the 

12 adjustment is being made by the an13 nual value of such index (or suc14 cessor) for the calendar year ending 

15 December 31, 2012; and 

16 ‘‘(II) multiplying such dollar 

17 amount by the quotient obtained 

18 under subclause (I). 

19 ‘‘(ii) ROUNDING.—Each dollar 

20 amount determined under clause (i) shall 

21 be rounded to the nearest multiple of 

22 $100,000.’’. 

23 (b) EFFECTIVE DATE.—Paragraph (13) of section 

24 15(b) of the Securities Exchange Act of 1934, as added 

25 by subsection (a), except subparagraph (J) of such paramstockstill on DSK4VPTVN1PROD with BILLS

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1 graph, shall take effect on the date that is 180 days after 

2 the date of the enactment of this Act. 

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