Merger and acquisition brokers

(a)

In general

Section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the end the following:

(13)

Merger and acquisition brokers

(A)

Registration by notice-filing

Notwithstanding paragraphs (1) and (2), an M&A broker may register for purposes of this section by filing with the Commission an electronic notice in such form and containing such information concerning the M&A broker and any persons associated with the M&A broker as the Commission may by rule prescribe as necessary or appropriate in the public interest or for the protection of investors. (B)

Effectiveness of registration

(i)

Immediate

Except as provided in clause (ii), the registration of an M&A broker under subparagraph (A) shall become effective upon receipt by the Commission of a properly completed notice from the M&A broker under such subparagraph. (ii)

Commission approval required

The registration of an M&A broker under subparagraph (A) shall not become effective without approval by the Commission if the M&A broker or a person associated with the M&A broker is subject to— (I)suspension or revocation of registration under paragraph (4); (II)a statutory disqualification (except that the date of the filing of the notice under subparagraph (A) shall be substituted for the date referred to in section 3(a)(39)(F)); or (III)disqualification under the rules adopted by the Commission under section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 77d note) (except that the date of the filing of the notice under subparagraph (A) shall be substituted for the date referred to in paragraph (2)(A)(ii) of such section). (C)

Updated information

If the information contained in a notice filed under subparagraph (A) becomes inaccurate or incomplete in any material respect, the M&A broker shall update such information in a form and manner to be specified by the Commission. (D)

Public availability

The Commission shall make publicly available on the website of the Commission the information provided in a notice filed under subparagraph (A), as updated under subparagraph (C). (E)

Disclosure to clients

The Commission may require an M&A broker registered under subparagraph (A) to deliver to the clients of the M&A broker a disclosure document describing the M&A broker and the affiliates, associated persons, services, and fees of the M&A broker, any conflicts of interest of the M&A broker, and such other information as the Commission considers necessary or appropriate in the public interest or for the protection of investors. (F)

Exemptions for M&A brokers

To the extent that the activities of an M&A broker registered under subparagraph (A) are within the scope of the activities described in subparagraph (K)(iii), the M&A broker (and any persons associated with the M&A broker) shall be exempt from— (i)except as provided in subparagraph (G), the requirements of this Act that apply to a broker registered, or required to be registered, under this subsection (or to any persons associated with such a broker, as the case may be); and (ii)the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.). (G)

Provisions applicable to M&A brokers

(i)

In general

The following provisions shall apply to an M&A broker registered under subparagraph (A) (or to any persons associated with the M&A broker, as the case may be): (I)This paragraph and paragraphs (4), (5), (6), and (7). (II)Subsection (a), paragraphs (1)(A) and (3)(A) of subsection (c), and subsection (g). (III)Subsections (a)(1) and (b)(1) of section 17. (ii)

Tailored application

In applying subsection (c)(3)(A) of this section and subsections (a)(1) and (b)(1) of section 17 to M&A brokers, the Commission shall take into account the nature of the transactions in which M&A brokers are involved, the involvement of the parties to such transactions in such transactions, and the limited scope of the activities of M&A brokers under subparagraph (K)(iii), including that M&A brokers do not have custody of the funds or securities to be exchanged by the parties to such transactions. (iii)

State law preemption

Subsection (i)(1) shall govern the relationship between the requirements applicable to M&A brokers under this Act and the requirements applicable to M&A brokers under the law of a State or a political subdivision of a State. Except as provided in such subsection, this paragraph shall not preempt the law of a State or a political subdivision of a State applicable to M&A brokers. (H)

Excluded activities

An M&A broker may not in reliance on this paragraph do any of the following: (i)Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receive, hold, transmit, or have custody of the funds or securities to be exchanged by the parties to the transaction. (ii)Engage 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 section 15(d). (I)

Coordination with the States

In establishing appropriate uniform and consistent standards of training, experience, competence, and other qualifications under paragraph (7) for persons associated with an M&A broker, and in prescribing the form and content of the notice described in subparagraph (A), the Commission shall cooperate, coordinate, and share information with any association composed of duly constituted representatives of State governments the primary assignment of which is the regulation of the securities business within such States. (J)

Regulations

Not later than 180 days after the date of the enactment of this paragraph, the Commission shall promulgate regulations to— (i)implement and enforce this paragraph; and (ii)codify the interpretative guidance issued by the staff of the Commission in the no-action letter to International Business Exchange Corporation dated December 12, 1986, and in the no-action letter to Country Business, Inc., dated November 8, 2006, with respect to circumstances under which registration as a broker under this section is not required. (K)

Definitions

In this paragraph: (i)

Control

The term control means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. There is a presumption of control for any person who— (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 25 percent or more of a class of voting securities or the power to sell or direct the sale of 25 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, 25 percent or more of the capital. (ii)

Eligible privately held company

The term eligible privately held company means a company that meets both of the following conditions: (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 section 15(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 means a broker engaged in the business of effecting the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company, if the broker reasonably believes that— (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 year-end balance sheet, income statement, statement of changes in financial position, and statement of owner’s equity of the issuer of the securities offered in exchange, and, if the financial statements of the issuer are audited, the related report of the independent auditor, 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. (L)

Inflation adjustment

(i)

In general

On the date that is 5 years after the Commission first promulgates final regulations under subparagraph (J), and every 5 years thereafter, each dollar amount in subparagraph (K)(ii)(II) shall be adjusted by— (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.

(b)

Effective date

Paragraph (13) of section 15(b) of the Securities Exchange Act of 1934, as added by subsection (a), except subparagraph (J) of such paragraph, shall take effect on the date that is 180 days after the date of the enactment of this Act.