The SEC recently enacted a new exemption from registration for brokers who provide certain services in M&A transactions. The new exemption, which became effective on March 29, 2023, largely confirms and codifies prior SEC guidance that was provided in a January 31, 2014 No Action Letter and will provide some comfort and certainty to qualifying M&A brokers and their advisors who work in this arena. However, it may require some M&A brokers to register with the SEC despite the fact that they were not previously required to do so.
The new exemption from SEC registration, which is contained in new Section 15(b)(13) of the 1934 Act, incorporates much of the language of the 2014 No Action Letter, but it imposes size limitations that were not contained in the 2014 No Action Letter. The SEC withdrew the 2014 No Action Letter on March 29, 2023.
Section 15(a) of the Securities Exchange Act of 1934 generally requires any person engaged in the business of carrying out securities transactions for other parties to register with the SEC. Such registration can be costly, intrusive, and time consuming, and it probably does not create a high level of additional consumer protection or benefits in the M&A context. This has consistently been an area of concern, however, since unregistered brokers can be subject to severe penalties such as monetary fines and disgorgement of fees that they have received. As a result, most M&A brokers and their advisors have relied on the 2014 No Action Letter to justify not registering with the SEC. This has largely been a successful strategy absent other disqualifying factors, but because no action letters can be reversed or changed, participants were unable to get totally comfortable.
Continue Reading New SEC Exemption from Registration for M&A Brokers: A Positive Step, but Not for All