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Union Calendar No. 303 

114TH CONGRESS 

2D SESSION H. R. 686 

[Report No. 114–400] 

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 

FEBRUARY 3, 2015 

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 28, 2016 

Additional sponsors: Mr. CURBELO of Florida, Ms. LOFGREN, Mr. LUCAS, Mr. 

JOLLY, Ms. KUSTER, Mr. EMMER of Minnesota, Mr. ROSS, and Mr. 

BRADY of Texas 

JANUARY 28, 2016 

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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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 2015’’. 

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 ‘‘(C) RULE OF CONSTRUCTION.—Nothing 

12 in this paragraph shall be construed to limit 

13 any other authority of the Commission to ex14 empt any person, or any class of persons, from 

15 any provision of this title, or from any provision 

16 of any rule or regulation thereunder. 

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

18 ‘‘(i) CONTROL.—The term ‘control’ 

19 means the power, directly or indirectly, to 

20 direct the management or policies of a 

21 company, whether through ownership of 

22 securities, by contract, or otherwise. There 

23 is a presumption of control for any person 

24 who— 


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1 ‘‘(I) is a director, general part2 ner, member or manager of a limited 

3 liability company, or officer exercising 

4 executive responsibility (or has similar 

5 status or functions); 

6 ‘‘(II) has the right to vote 20 

7 percent or more of a class of voting 

8 securities or the power to sell or direct 

9 the sale of 20 percent or more of a 

10 class of voting securities; or 

11 ‘‘(III) in the case of a partner12 ship or limited liability company, has 

13 the right to receive upon dissolution, 

14 or has contributed, 20 percent or 

15 more of the capital. 

16 ‘‘(ii) ELIGIBLE PRIVATELY HELD

17 COMPANY.—The term ‘eligible privately 

18 held company’ means a company that 

19 meets both of the following conditions: 

20 ‘‘(I) The company does not have 

21 any class of securities registered, or 

22 required to be registered, with the 

23 Commission under section 12 or with 

24 respect to which the company files, or 

25 is required to file, periodic informaVerDate Sep 11 2014 22:44 Jan 28, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H686.RH H686

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1 tion, documents, and reports under 

2 subsection (d). 

3 ‘‘(II) In the fiscal year ending 

4 immediately 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 com8 pany meets either or both of the fol9 lowing conditions (determined in ac10 cordance with the historical financial 

11 accounting records of the company): 

12 ‘‘(aa) The earnings of the 

13 company before interest, taxes, 

14 depreciation, and amortization 

15 are 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, and any person 

21 associated with a broker, engaged in the 

22 business of effecting securities transactions 

23 solely in connection with the transfer of 

24 ownership of an eligible privately held com25 pany, regardless of whether the broker acts 


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1 on behalf of a seller or buyer, through the 

2 purchase, sale, exchange, issuance, repur3 chase, or redemption of, or a business com4 bination involving, securities or assets of 

5 the eligible privately held company, if the 

6 broker reasonably believes that— 

7 ‘‘(I) upon consummation of the 

8 transaction, any person acquiring se9 curities or assets of the eligible pri10 vately held company, acting alone or 

11 in concert, will control and, directly or 

12 indirectly, will be active in the man13 agement of the eligible privately held 

14 company or the business conducted 

15 with the assets of the eligible privately 

16 held company; and 

17 ‘‘(II) if any person is offered se18 curities in exchange for securities or 

19 assets of the eligible privately held 

20 company, such person will, prior to 

21 becoming legally bound to consum22 mate the transaction, receive or have 

23 reasonable access to the most recent 

24 year-end balance sheet, income state25 ment, statement of changes in finanVerDate Sep 11 2014 22:44 Jan 28, 2016 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H686.RH H686

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1 cial position, and statement of owner’s 

2 equity of the issuer of the securities 

3 offered in exchange, and, if the finan4 cial statements of the issuer are au5 dited, the related report of the inde6 pendent auditor, a balance sheet 

7 dated not more than 120 days before 

8 the date of the offer, and information 

9 pertaining to the management, busi10 ness, results of operations for the pe11 riod covered by the foregoing financial 

12 statements, and material loss contin13 gencies of the issuer. 

14 ‘‘(E) INFLATION ADJUSTMENT.— 

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

16 is 5 years after the date of the enactment 

17 of the Small Business Mergers, Acquisi18 tions, Sales, and Brokerage Simplification 

19 Act of 2015, and every 5 years thereafter, 

20 each dollar amount in subparagraph 

21 (D)(ii)(II) shall be adjusted by— 

22 ‘‘(I) dividing the annual value of 

23 the Employment Cost Index For 

24 Wages and Salaries, Private Industry 

25 Workers (or any successor index), as 


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1 published by the Bureau of Labor 

2 Statistics, for the calendar year pre3 ceding the calendar year in which the 

4 adjustment is being made by the an5 nual value of such index (or suc6 cessor) for the calendar year ending 

7 December 31, 2012; and 

8 ‘‘(II) multiplying such dollar 

9 amount by the quotient obtained 

10 under subclause (I). 

11 ‘‘(ii) ROUNDING.—Each dollar 

12 amount determined under clause (i) shall 

13 be rounded to the nearest multiple of 

14 $100,000.’’. 

15 SEC. 3. EFFECTIVE DATE. 

16 This Act and any amendment made by this Act shall 

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

18 the enactment of this Act. 


tkelley on DSK3SPTVN1PROD with BILLS
Union Calendar No. 303 

114TH CONGRESS 

2D SESSION H. R. 686 

[Report No. 114–400] 

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 

JANUARY 28, 2016 

Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


tkelley on DSK3SPTVN1PROD with BILLS