Registration exemption for merger and acquisition brokers

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)

Registration exemption for merger and acquisition brokers

(A)

In general

Except as provided in subparagraph (B), an M&A broker and any person associated with an M&A broker shall be exempt from registration under this section. (B)

Excluded activities

An M&A broker or a person associated with an M&A broker is not exempt from registration under this paragraph if such broker or associated person 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). (C)

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. (D)

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 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 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 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 means a broker engaged in the business of effecting securities transactions solely in connection with 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. (E)

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 2013, and every 5 years thereafter, each dollar amount in subparagraph (D)(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.