Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017

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. Short title This Act may be cited as the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017 2. Registration exemption for merger and acquisition brokers Section 15(b) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78o(b) (13) Registration exemption for merger and acquisition brokers (A) In general Except as provided in subparagraph (B), an M&A broker shall be exempt from registration under this section. (B) Excluded activities An M&A broker is not exempt from registration under this paragraph if such broker does any of the following: (i) Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction. (ii) Engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the Commission under section 12 or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under subsection (d). (iii) Engages on behalf of any party in a transaction involving a public shell company. (C) Disqualifications An M&A broker is not exempt from registration under this paragraph if such broker is subject to— (i) suspension or revocation of registration under paragraph (4); (ii) a statutory disqualification described in section 3(a)(39); (iii) a disqualification under the rules adopted by the Commission under section 926 of the Investor Protection and Securities Reform Act of 2010 ( 15 U.S.C. 77d (iv) a final order described in paragraph (4)(H). (D) Rule of construction Nothing in this paragraph shall be construed to limit any other authority of the Commission to exempt any person, or any class of persons, from any provision of this title, or from any provision of any rule or regulation thereunder. (E) Definitions In this paragraph: (i) Control The term control (I) is a director, general partner, member or manager of a limited liability company, or officer exercising executive responsibility (or has similar status or functions); (II) has the right to vote 20 percent or more of a class of voting securities or the power to sell or direct the sale of 20 percent or more of a class of voting securities; or (III) in the case of a partnership or limited liability company, has the right to receive upon dissolution, or has contributed, 20 percent or more of the capital. (ii) Eligible privately held company The term eligible privately held company (I) The company does not have any class of securities registered, or required to be registered, with the Commission under section 12 or with respect to which the company files, or is required to file, periodic information, documents, and reports under subsection (d). (II) In the fiscal year ending immediately before the fiscal year in which the services of the M&A broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions (determined in accordance with the historical financial accounting records of the company): (aa) The earnings of the company before interest, taxes, depreciation, and amortization are less than $25,000,000. (bb) The gross revenues of the company are less than $250,000,000. (iii) M&A broker The term M&A broker (I) upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert, will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and (II) if any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent fiscal year-end financial statements of the issuer of the securities as customarily prepared by the management of the issuer in the normal course of operations and, if the financial statements of the issuer are audited, reviewed, or compiled, any related statement by the independent accountant, a balance sheet dated not more than 120 days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and material loss contingencies of the issuer. (iv) Public shell company The term public shell company (I) has any class of securities registered, or required to be registered, with the Commission under section 12 or that is required to file reports pursuant to subsection (d); (II) has no or nominal operations; and (III) has— (aa) no or nominal assets; (bb) assets consisting solely of cash and cash equivalents; or (cc) assets consisting of any amount of cash and cash equivalents and nominal other assets. (F) Inflation adjustment (i) In general On the date that is 5 years after the date of the enactment of the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017 (I) dividing the annual value of the Employment Cost Index For Wages and Salaries, Private Industry Workers (or any successor index), as published by the Bureau of Labor Statistics, for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index (or successor) for the calendar year ending December 31, 2012; and (II) multiplying such dollar amount by the quotient obtained under subclause (I). (ii) Rounding Each dollar amount determined under clause (i) shall be rounded to the nearest multiple of $100,000. . 3. Effective date This Act and any amendment made by this Act shall take effect on the date that is 90 days after the date of the enactment of this Act. November 30, 2017 Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Summary: Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017 (Sec. 2) This bill amends the Securities Exchange Act of 1934 to exempt from that Act's registration requirements merger-and-acquisition brokers that facilitate transfer of ownership in privately held companies with earnings or revenues under a specified threshold. This exemption shall not apply, however, to brokers that: receive, hold, transmit, or have custody of funds or securities to be exchanged by parties to an ownership transfer; engage on behalf of an issuer in a public offering of registered securities; engage on behalf of any party in a transaction involving specified shell companies; provide financing related to the transfer of ownership; assist any party to obtain financing from a third party in specified circumstances; represent both buyer and seller without disclosure and consent from both parties; facilitate a transaction with a group of buyers formed with the assistance of the broker; engage in transferring ownership to a passive buyer; bind a party to a transfer of ownership; or are subject to suspension or revocation of registration or to other specified disqualifications.