I 

115TH CONGRESS 

1ST SESSION H. R. 477 

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 

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. 

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’’. 


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1 SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND AC2 QUISITION BROKERS. 

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

4 (15 U.S.C. 78o(b)) is amended by adding at the end the 

5 following: 

6 ‘‘(13) REGISTRATION EXEMPTION FOR MERGER

7 AND ACQUISITION BROKERS.— 

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

9 subparagraph (B), an M&A broker shall be ex10 empt from registration under this section. 

11 ‘‘(B) EXCLUDED ACTIVITIES.—An M&A 

12 broker is not exempt from registration under 

13 this paragraph if such broker does any of the 

14 following: 

15 ‘‘(i) Directly or indirectly, in connec16 tion with the transfer of ownership of an 

17 eligible privately held company, receives, 

18 holds, transmits, or has custody of the 

19 funds or securities to be exchanged by the 

20 parties to the transaction. 

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

22 a public offering of any class of securities 

23 that is registered, or is required to be reg24 istered, with the Commission under section 

25 12 or with respect to which the issuer files, 

26 or is required to file, periodic information, 


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1 documents, and reports under subsection 

2 (d). 

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

4 in a transaction involving a public shell 

5 company. 

6 ‘‘(C) DISQUALIFICATIONS.—An M&A 

7 broker is not exempt from registration under 

8 this paragraph if such broker is subject to— 

9 ‘‘(i) suspension or revocation of reg10 istration under paragraph (4); 

11 ‘‘(ii) a statutory disqualification de12 scribed in section 3(a)(39); 

13 ‘‘(iii) a disqualification under the 

14 rules adopted by the Commission under 

15 section 926 of the Investor Protection and 

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

17 77d note); or 

18 ‘‘(iv) a final order described in para19 graph (4)(H). 

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

21 in this paragraph shall be construed to limit 

22 any other authority of the Commission to ex23 empt any person, or any class of persons, from 

24 any provision of this title, or from any provision 

25 of any rule or regulation thereunder. 


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1 ‘‘(E) 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 20 

15 percent or more of a class of voting 

16 securities or the power to sell or direct 

17 the sale of 20 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, 20 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 privately held com2 pany that meets both of the following con3 ditions: 

4 ‘‘(I) The company does not have 

5 any class of securities registered, or 

6 required to be registered, with the 

7 Commission under section 12 or with 

8 respect to which the company files, or 

9 is required to file, periodic informa10 tion, documents, and reports under 

11 subsection (d). 

12 ‘‘(II) In the fiscal year ending 

13 immediately before the fiscal year in 

14 which the services of the M&A broker 

15 are initially engaged with respect to 

16 the securities transaction, the com17 pany meets either or both of the fol18 lowing conditions (determined in ac19 cordance with the historical financial 

20 accounting records of the company): 

21 ‘‘(aa) The earnings of the 

22 company before interest, taxes, 

23 depreciation, and amortization 

24 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, and any person 

6 associated with a broker, engaged in the 

7 business of effecting securities transactions 

8 solely in connection with the transfer of 

9 ownership of an eligible privately held com10 pany, regardless of whether the broker acts 

11 on behalf of a seller or buyer, through the 

12 purchase, sale, exchange, issuance, repur13 chase, or redemption of, or a business com14 bination involving, securities or assets of 

15 the eligible privately held company, if the 

16 broker reasonably believes that— 

17 ‘‘(I) upon consummation of the 

18 transaction, any person acquiring se19 curities or assets of the eligible pri20 vately held company, acting alone or 

21 in concert, will control and, directly or 

22 indirectly, will be active in the man23 agement of the eligible privately held 

24 company or the business conducted 


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1 with the assets of the eligible privately 

2 held company; and 

3 ‘‘(II) if any person is offered se4 curities in exchange for securities or 

5 assets of the eligible privately held 

6 company, such person will, prior to 

7 becoming legally bound to consum8 mate the transaction, receive or have 

9 reasonable access to the most recent 

10 fiscal year-end financial statements of 

11 the issuer of the securities as custom12 arily prepared by the management of 

13 the issuer in the normal course of op14 erations and, if the financial state15 ments of the issuer are audited, re16 viewed, or compiled, any related state17 ment by the independent accountant, 

18 a balance sheet dated not more than 

19 120 days before the date of the offer, 

20 and information pertaining to the 

21 management, business, results of op22 erations for the period covered by the 

23 foregoing financial statements, and 

24 material loss contingencies of the 

25 issuer. 


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1 ‘‘(iv) PUBLIC SHELL COMPANY.—The 

2 term ‘public shell company’ is a company 

3 that at the time of a transaction with an 

4 eligible privately held company— 

5 ‘‘(I) has any class of securities 

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

8 section 12 or that is required to file 

9 reports pursuant to subsection (d); 

10 ‘‘(II) has no or nominal oper11 ations; and 

12 ‘‘(III) has— 

13 ‘‘(aa) no or nominal assets; 

14 ‘‘(bb) assets consisting solely 

15 of cash and cash equivalents; or 

16 ‘‘(cc) assets consisting of 

17 any amount of cash and cash 

18 equivalents and nominal other as19 sets. 

20 ‘‘(F) INFLATION ADJUSTMENT.— 

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

22 is 5 years after the date of the enactment 

23 of the Small Business Mergers, Acquisi24 tions, Sales, and Brokerage Simplification 

25 Act of 2017, and every 5 years thereafter, 


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1 each dollar amount in subparagraph 

2 (E)(ii)(II) shall be adjusted by— 

3 ‘‘(I) dividing the annual value of 

4 the Employment Cost Index For 

5 Wages and Salaries, Private Industry 

6 Workers (or any successor index), as 

7 published by the Bureau of Labor 

8 Statistics, for the calendar year pre9 ceding the calendar year in which the 

10 adjustment is being made by the an11 nual value of such index (or suc12 cessor) for the calendar year ending 

13 December 31, 2012; and 

14 ‘‘(II) multiplying such dollar 

15 amount by the quotient obtained 

16 under subclause (I). 

17 ‘‘(ii) ROUNDING.—Each dollar 

18 amount determined under clause (i) shall 

19 be rounded to the nearest multiple of 

20 $100,000.’’. 

21 SEC. 3. EFFECTIVE DATE. 

22 This Act and any amendment made by this Act shall 

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

24 the enactment of this Act. 

Æ 


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