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Union Calendar No. 318 

115TH CONGRESS 

1ST SESSION H. R. 477 

[Report No. 115–431] 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 12, 2017 

Mr. HUIZENGA (for himself, Mr. POSEY, and Mr. HIGGINS of New York) introduced the following bill; which was referred to the Committee on Financial Services 

NOVEMBER 30, 2017 

Additional sponsors: Mr. JOYCE of Ohio, Mr. BRADY of Texas, Mr. ROSS, Mr. 

LUCAS, Mr. YOUNG of Iowa, Ms. LOFGREN, Mr. BUDD, and Mr. SESSIONS

NOVEMBER 30, 2017 

Committed to the Committee of the Whole House on the State of the Union 

and ordered to be printed 


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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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•HR 477 RH

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 Merg5 ers, Acquisitions, Sales, and Brokerage Simplification Act 

6 of 2017’’. 

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 shall be ex16 empt from registration under this section. 

17 ‘‘(B) EXCLUDED ACTIVITIES.—An M&A 

18 broker is not exempt from registration under 

19 this paragraph if such broker does any of the 

20 following: 

21 ‘‘(i) Directly or indirectly, in connec22 tion with the transfer of ownership of an 

23 eligible privately held company, receives, 

24 holds, transmits, or has custody of the 


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1 funds or securities to be exchanged by the 

2 parties to the transaction. 

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

4 a public offering of any class of securities 

5 that is registered, or is required to be reg6 istered, with the Commission under section 

7 12 or with respect to which the issuer files, 

8 or is required to file, periodic information, 

9 documents, and reports under subsection 

10 (d). 

11 ‘‘(iii) Engages on behalf of any party 

12 in a transaction involving a public shell 

13 company. 

14 ‘‘(C) DISQUALIFICATIONS.—An M&A 

15 broker is not exempt from registration under 

16 this paragraph if such broker is subject to— 

17 ‘‘(i) suspension or revocation of reg18 istration under paragraph (4); 

19 ‘‘(ii) a statutory disqualification de20 scribed in section 3(a)(39); 

21 ‘‘(iii) a disqualification under the 

22 rules adopted by the Commission under 

23 section 926 of the Investor Protection and 

24 Securities Reform Act of 2010 (15 U.S.C. 

25 77d note); or 


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1 ‘‘(iv) a final order described in para2 graph (4)(H). 

3 ‘‘(D) RULE OF CONSTRUCTION.—Nothing 

4 in this paragraph shall be construed to limit 

5 any other authority of the Commission to ex6 empt any person, or any class of persons, from 

7 any provision of this title, or from any provision 

8 of any rule or regulation thereunder. 

9 ‘‘(E) DEFINITIONS.—In this paragraph: 

10 ‘‘(i) CONTROL.—The term ‘control’ 

11 means the power, directly or indirectly, to 

12 direct the management or policies of a 

13 company, whether through ownership of 

14 securities, by contract, or otherwise. There 

15 is a presumption of control for any person 

16 who— 

17 ‘‘(I) is a director, general part18 ner, member or manager of a limited 

19 liability company, or officer exercising 

20 executive responsibility (or has similar 

21 status or functions); 

22 ‘‘(II) has the right to vote 20 

23 percent or more of a class of voting 

24 securities or the power to sell or direct 


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1 the sale of 20 percent or more of a 

2 class of voting securities; or 

3 ‘‘(III) in the case of a partner4 ship or limited liability company, has 

5 the right to receive upon dissolution, 

6 or has contributed, 20 percent or 

7 more of the capital. 

8 ‘‘(ii) ELIGIBLE PRIVATELY HELD

9 COMPANY.—The term ‘eligible privately 

10 held company’ means a privately held com11 pany that meets both of the following con12 ditions: 

13 ‘‘(I) The company does not have 

14 any class of securities registered, or 

15 required to be registered, with the 

16 Commission under section 12 or with 

17 respect to which the company files, or 

18 is required to file, periodic informa19 tion, documents, and reports under 

20 subsection (d). 

21 ‘‘(II) In the fiscal year ending 

22 immediately before the fiscal year in 

23 which the services of the M&A broker 

24 are initially engaged with respect to 

25 the securities transaction, the comVerDate Sep 11 2014 21:36 Nov 30, 2017 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H477.RH H477

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1 pany meets either or both of the fol2 lowing conditions (determined in ac3 cordance with the historical financial 

4 accounting records of the company): 

5 ‘‘(aa) The earnings of the 

6 company before interest, taxes, 

7 depreciation, and amortization 

8 are less than $25,000,000. 

9 ‘‘(bb) The gross revenues of 

10 the company are less than 

11 $250,000,000. 

12 ‘‘(iii) M&A BROKER.—The term ‘M&A 

13 broker’ means a broker, and any person 

14 associated with a broker, engaged in the 

15 business of effecting securities transactions 

16 solely in connection with the transfer of 

17 ownership of an eligible privately held com18 pany, regardless of whether the broker acts 

19 on behalf of a seller or buyer, through the 

20 purchase, sale, exchange, issuance, repur21 chase, or redemption of, or a business com22 bination involving, securities or assets of 

23 the eligible privately held company, if the 

24 broker reasonably believes that— 


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1 ‘‘(I) upon consummation of the 

2 transaction, any person acquiring se3 curities or assets of the eligible pri4 vately held company, acting alone or 

5 in concert, will control and, directly or 

6 indirectly, will be active in the man7 agement of the eligible privately held 

8 company or the business conducted 

9 with the assets of the eligible privately 

10 held company; and 

11 ‘‘(II) if any person is offered se12 curities in exchange for securities or 

13 assets of the eligible privately held 

14 company, such person will, prior to 

15 becoming legally bound to consum16 mate the transaction, receive or have 

17 reasonable access to the most recent 

18 fiscal year-end financial statements of 

19 the issuer of the securities as custom20 arily prepared by the management of 

21 the issuer in the normal course of op22 erations and, if the financial state23 ments of the issuer are audited, re24 viewed, or compiled, any related state25 ment by the independent accountant, 


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1 a balance sheet dated not more than 

2 120 days before the date of the offer, 

3 and information pertaining to the 

4 management, business, results of op5 erations for the period covered by the 

6 foregoing financial statements, and 

7 material loss contingencies of the 

8 issuer. 

9 ‘‘(iv) PUBLIC SHELL COMPANY.—The 

10 term ‘public shell company’ is a company 

11 that at the time of a transaction with an 

12 eligible privately held company— 

13 ‘‘(I) has any class of securities 

14 registered, or required to be reg15 istered, with the Commission under 

16 section 12 or that is required to file 

17 reports pursuant to subsection (d); 

18 ‘‘(II) has no or nominal oper19 ations; and 

20 ‘‘(III) has— 

21 ‘‘(aa) no or nominal assets; 

22 ‘‘(bb) assets consisting solely 

23 of cash and cash equivalents; or 

24 ‘‘(cc) assets consisting of 

25 any amount of cash and cash 


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1 equivalents and nominal other as2 sets. 

3 ‘‘(F) INFLATION ADJUSTMENT.— 

4 ‘‘(i) IN GENERAL.—On the date that 

5 is 5 years after the date of the enactment 

6 of the Small Business Mergers, Acquisi7 tions, Sales, and Brokerage Simplification 

8 Act of 2017, and every 5 years thereafter, 

9 each dollar amount in subparagraph 

10 (E)(ii)(II) shall be adjusted by— 

11 ‘‘(I) dividing the annual value of 

12 the Employment Cost Index For 

13 Wages and Salaries, Private Industry 

14 Workers (or any successor index), as 

15 published by the Bureau of Labor 

16 Statistics, for the calendar year pre17 ceding the calendar year in which the 

18 adjustment is being made by the an19 nual value of such index (or suc20 cessor) for the calendar year ending 

21 December 31, 2012; and 

22 ‘‘(II) multiplying such dollar 

23 amount by the quotient obtained 

24 under subclause (I). 


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1 ‘‘(ii) ROUNDING.—Each dollar 

2 amount determined under clause (i) shall 

3 be rounded to the nearest multiple of 

4 $100,000.’’. 

5 SEC. 3. EFFECTIVE DATE. 

6 This Act and any amendment made by this Act shall 

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

8 the enactment of this Act. 


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Union Calendar No. 318 

115TH CONGRESS 

1ST SESSION H. R. 477 

[Report No. 115–431] 

A BILL 

To amend the Securities Exchange Act of 1934 to 

ship of smaller privately held companies. services in connection with the transfer of ownerexempt from registration brokers performing 

NOVEMBER 30, 2017 

Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


ethrower on DSK3G9T082PROD with BILLS