II 

117TH CONGRESS 

1ST SESSION S. 3391 

To amend the Securities Exchange Act of 1934 to establish a registration 

exemption for merger and acquisition brokers, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 14, 2021 

Mr. KENNEDY introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Securities Exchange Act of 1934 to establish 

a registration exemption for merger and acquisition brokers, and for other purposes. 

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 2021’’. 


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

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

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

5 adding at the end the following: 

6 ‘‘(13) REGISTRATION EXEMPTION FOR MERGER

7 AND ACQUISITION BROKERS.— 

8 ‘‘(A) DEFINITIONS.—In this paragraph: 

9 ‘‘(i) BUSINESS COMBINATION RE10 LATED SHELL COMPANY.—The term ‘busi11 ness combination related shell company’ 

12 means a shell company that is formed by 

13 an entity that is not a shell company solely 

14 for the purpose of— 

15 ‘‘(I) changing the corporate 

16 domicile of that entity solely within 

17 the United States; or 

18 ‘‘(II) completing a business com19 bination transaction (as defined in 

20 section 230.165(f) of title 17, Code of 

21 Federal Regulations, or any successor 

22 regulation) among not less than 1 en23 tity other than the company itself, 

24 none of which is a shell company. 

25 ‘‘(ii) CONTROL.— 


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1 ‘‘(I) IN GENERAL.—The term 

2 ‘control’ means the power, directly or 

3 indirectly, to direct the management 

4 or policies of a company, whether 

5 through ownership of securities, by 

6 contract, or otherwise. 

7 ‘‘(II) PRESUMPTION.—For the 

8 purposes of subclause (I), there shall 

9 be a presumption of control if, upon 

10 completion of a transaction, a buyer 

11 or group of buyers— 

12 ‘‘(aa) has the right to vote 

13 25 percent or more of a class of 

14 voting securities or the power to 

15 sell or direct the sale of 25 per16 cent or more of a class of voting 

17 securities; or 

18 ‘‘(bb) in the case of a part19 nership or limited liability com20 pany, has the right to receive 

21 upon dissolution, or has contrib22 uted, 25 percent or more of the 

23 capital. 

24 ‘‘(iii) 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— 

6 ‘‘(aa) registered, or required 

7 to be registered, with the Com8 mission under section 12; or 

9 ‘‘(bb) with respect to which 

10 the company files, or is required 

11 to file, periodic information, doc12 uments, and reports under sub13 section (d). 

14 ‘‘(II)(aa) In the fiscal year end15 ing immediately before the fiscal year 

16 in which the services of an M&A 

17 broker are initially engaged with re18 spect to a securities transaction, the 

19 company meets either of the following 

20 conditions (determined in accordance 

21 with the historical financial account22 ing records of the company): 

23 ‘‘(AA) The earnings of the 

24 company before interest, taxes, 


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1 depreciation, and amortization 

2 are less than $25,000,000. 

3 ‘‘(BB) The gross revenues 

4 of the company are less than 

5 $250,000,000. 

6 ‘‘(bb) For purposes of this sub7 clause, the Commission may, by rule, 

8 modify the dollar figures in subitem 

9 (AA) or (BB) of item (aa) if the Com10 mission determines that such a modi11 fication is necessary or appropriate in 

12 the public interest or for the protec13 tion of investors. 

14 ‘‘(iv) M&A BROKER.—The term ‘M&A 

15 broker’ means a broker, and any person 

16 associated with a broker, engaged in the 

17 business of effecting securities transactions 

18 solely in connection with the transfer of 

19 ownership of an eligible privately held com20 pany, regardless of whether the broker acts 

21 on behalf of a seller or buyer, through the 

22 purchase, sale, exchange, issuance, repur23 chase, or redemption of, or a business com24 bination involving, securities or assets of 


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1 the eligible privately held company, if the 

2 broker reasonably believes that— 

3 ‘‘(I) upon consummation of the 

4 transaction, any person acquiring se5 curities or assets of the eligible pri6 vately held company, acting alone or 

7 in concert— 

8 ‘‘(aa) will control the eligible 

9 privately held company or the 

10 business conducted with the as11 sets of the eligible privately held 

12 company; and 

13 ‘‘(bb) directly or indirectly, 

14 will be active in the management 

15 of the eligible privately held com16 pany or the business conducted 

17 with the assets of the eligible pri18 vately held company, including 

19 without limitation, by— 

20 ‘‘(AA) electing execu21 tive officers; 

22 ‘‘(BB) approving the 

23 annual budget; 


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1 ‘‘(CC) serving as an ex2 ecutive or other executive 

3 manager; or 

4 ‘‘(DD) carrying out 

5 such other activities as the 

6 Commission may, by rule, 

7 determine to be in the public 

8 interest; and 

9 ‘‘(II) if any person is offered se10 curities in exchange for securities or 

11 assets of the eligible privately held 

12 company, that person will, before be13 coming legally bound to consummate 

14 the transaction, receive or have rea15 sonable access to— 

16 ‘‘(aa) the most recent fiscal 

17 year-end financial statements of 

18 the issuer of the securities, as 

19 customarily prepared by the man20 agement of the issuer in the nor21 mal course of operations; and 

22 ‘‘(bb) if the financial state23 ments of the issuer are audited, 

24 reviewed, or compiled— 


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1 ‘‘(AA) any related 

2 statement by the inde3 pendent accountant; 

4 ‘‘(BB) a balance sheet 

5 dated not more than 120 

6 days before the date of the 

7 offer; and 

8 ‘‘(CC) information per9 taining to the management, 

10 business, results of oper11 ations for the period covered 

12 by the foregoing financial 

13 statements and material loss 

14 contingencies of the issuer. 

15 ‘‘(v) SHELL COMPANY.—The term 

16 ‘shell company’ means a company that, as 

17 of the date of a transaction with an eligible 

18 privately held company— 

19 ‘‘(I) has no or nominal oper20 ations; and 

21 ‘‘(II) has— 

22 ‘‘(aa) no or nominal assets; 

23 ‘‘(bb) assets consisting solely 

24 of cash and cash equivalents; or 


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1 ‘‘(cc) assets consisting of 

2 any amount of cash and cash 

3 equivalents and nominal other as4 sets. 

5 ‘‘(B) EXEMPTION.—Except as provided in 

6 subparagraph (C), an M&A broker shall be ex7 empt from registration under this section. 

8 ‘‘(C) EXCLUDED ACTIVITIES.—An M&A 

9 broker is not exempt from registration under 

10 this paragraph if the M&A broker does any of 

11 the following: 

12 ‘‘(i) Directly or indirectly, in connec13 tion with the transfer of ownership of an 

14 eligible privately held company, receives, 

15 holds, transmits, or has custody of the 

16 funds or securities to be exchanged by the 

17 parties to the transaction. 

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

19 a public offering of any class of securi20 ties— 

21 ‘‘(I) that is registered, or is re22 quired to be registered, with the Com23 mission under section 12; or 

24 ‘‘(II) with respect to which the 

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1 riod information, documents, and re2 ports under subsection (d). 

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

4 in a transaction involving a shell company, 

5 other than a business combination related 

6 shell company. 

7 ‘‘(iv) Directly, or indirectly through 

8 any of its affiliates, provides financing re9 lating to the transfer of ownership of an 

10 eligible privately held company. 

11 ‘‘(v) Assists any party to obtain fi12 nancing from an unaffiliated third party 

13 without— 

14 ‘‘(I) complying with all other ap15 plicable laws in connection with such 

16 assistance, including, if applicable, 

17 part 220 of title 12, Code of Federal 

18 Regulations, or any successor regula19 tions; and 

20 ‘‘(II) disclosing any compensation 

21 in writing to the party. 

22 ‘‘(vi) Represents both the buyer and 

23 the seller in the same transaction with24 out— 


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1 ‘‘(I) providing clear written dis2 closure with respect to the parties the 

3 broker represents; and 

4 ‘‘(II) obtaining written consent 

5 from both parties to the joint rep6 resentation. 

7 ‘‘(vii) Facilitates a transaction with a 

8 group of buyers formed with the assistance 

9 of the M&A broker to acquire the eligible 

10 privately held company. 

11 ‘‘(viii) Engages in a transaction in12 volving the transfer of ownership of an eli13 gible privately held company to a passive 

14 buyer or group of passive buyers. 

15 ‘‘(ix) Binds a party to a transfer of 

16 ownership of an eligible privately held com17 pany. 

18 ‘‘(D) DISQUALIFICATION.—An M&A 

19 broker is not exempt from registration under 

20 this paragraph if the M&A broker (and, as ap21 plicable, any officer, director, member, man22 ager, partner, or employee of the M&A 

23 broker)— 

24 ‘‘(i) has been barred from association 

25 with a broker or dealer by the Commission, 


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1 any State, or any self-regulatory organiza2 tion; or 

3 ‘‘(ii) is suspended from association 

4 with a broker or dealer. 

5 ‘‘(E) RULE OF CONSTRUCTION.—Nothing 

6 in this paragraph may be construed to limit any 

7 other authority of the Commission to exempt 

8 any person, or any class of persons, from any 

9 provision of this title, or from any provision of 

10 any rule or regulation thereunder. 

11 ‘‘(F) INFLATION ADJUSTMENT.— 

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

13 is 5 years after the date of enactment of 

14 this paragraph, and every 5 years there15 after, each dollar amount in subparagraph 

16 (A)(iii)(II)(aa) shall be adjusted by— 

17 ‘‘(I) dividing the annual value of 

18 the Employment Cost Index For 

19 Wages and Salaries, Private Industry 

20 Workers (or any successor index), as 

21 published by the Bureau of Labor 

22 Statistics, for the calendar year pre23 ceding the calendar year in which the 

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1 cessor) for the calendar year ending 

2 December 31, 2020; and 

3 ‘‘(II) multiplying such dollar 

4 amount by the quotient obtained 

5 under subclause (I). 

6 ‘‘(ii) ROUNDING.—Each dollar 

7 amount determined under clause (i) shall 

8 be rounded to the nearest multiple of 

9 $100,000.’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 subsection (a) shall take effect on the date that is 90 days 

12 after the date of enactment of this Act. 

Æ 


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