House Committee Passes Law Reducing Business-Broker Regulation

House Committee Passes Law Reducing Business-Broker Regulation

Securities Lawyer 101 Blog

On November 14, 2013, the Financial Services Committee of the U.S. House of Representatives voted unanimously to report HR 2274, as amended, to the full House with a favorable recommendation. HR 2274 is known as the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013, and its intention is to amend the Securities Exchange Act of 1934 (“Securities Act”) to provide for a notice-filing registration procedure for business brokers performing services in connection with the transfer of ownership of small privately held companies and to provide for regulation appropriate to the limited scope of their activities.

Under existing regulations, the same broker-dealer registration requirements apply to business brokers who assist with the sale of a small business to a purchaser who will be active in managing the business after sale and a securities brokers who engage in the offer and sale of securities of a publicly-traded companies to passive investors. Existing regulations fail to distinguish between these two activities despite the obvious need for differential treatment.

HR 2274 would significantly reduce federal securities regulation in privately negotiated mergers and acquisitions. The bill would apply to M&A transactions involving the sale of private companies with earnings of less than $25 million and revenue of less than $250 million to active buyers.

The bill is one of several that are often referred to collectively as “JOBS Act 2.0.” These measures are designed to help small businesses by lessening their regulatory burdens.

Under HR 2274, merger and acquisition brokers whose work is facilitating the sale of small businesses can register with the SEC simply by filing a notice. Registration will be effective immediately. Brokers will not be required to become members of the Financial Industry Regulatory Authority (“FINRA”), nor will they be regulated by FINRA.

In a move that surprised some, the North American Securities Administrators Association (“NASAA”) threw its support behind the bill. NASAA has been critical of many provisions of the JOBS Act. But in recent testimony before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, A. Heath Abshure of NASAA said the organization “is optimistic that this legislation will encourage registration and regulatory compliance by M&A brokers.”

The bill must still be voted on by the full House and the Senate before it can be signed into law. It will probably be bundled with the other JOBS Act 2.0 measures. It will become effective 90 days after it become law.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit

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