On January 31, 2014, the SEC Division of Trading and Markets issued a no-action letter to Faith Colish and five other lawyers providing relief from broker-dealer registration for M&A Brokers engaged in activities related to the purchase or sale of a privately held company (the “M&A Broker Letter”). The term “M&A Broker” is defined, for purposes of the letter, as “a person engaged in the business of effecting securities transactions solely in connection with the transfer of ownership and control of a privately held company through the purchase sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company.”
The M&A Broker Letter represents a new direction in guidance for unregistered persons advising companies in M&A transactions. The two prior no-action letters in the area, International Business Exchange Corporation, SEC No-Action Letter (pub. avail. Dec. 12, 1986) and Country Business, Inc., SEC No-Action Letter (pub. avail. Nov. 8, 2006), focused on the question of whether the broker was engaged in the business of effecting transactions in securities and placed limitations on the way the broker could be paid and the ability of the broker to negotiate a securities transaction in connection with the sale of a business. The M&A Broker Letter, by contrast, permits the M&A Broker to be engaged in the business of effecting securities transactions in connection with its business as an M&A Broker provided the conditions of the letter are met.
The M&A Broker Letter uses the following additional defined terms:
Conditions to Acting as an M&A Broker
The M&A Broker Letter lists the following 10 conditions to the availability of relief from broker-dealer registration for an M&A broker:
State Law Regulation Not Affected
State laws requiring registration as a broker or dealer are not preempted or otherwise affected by the SEC no-action letter. M&A brokers will need to determine whether they have exemptions or exclusions available in any state where they plan to do business, or register with the state securities administrator.
M&A Brokers, SEC No-Action Letter (pub. avail. January 31, 2014 (revised Feb. 4, 2014)).
For more information about the contents of this alert, please contact:
Elizabeth Shea Fries
Consumer Financial Services
© 2014 Goodwin Procter LLP. All rights reserved. This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP, Goodwin Procter (UK) LLP or their attorneys. Prior results do not guarantee similar outcome.
Goodwin Procter LLP is a limited liability partnership which operates in the United States and has a principal law office located at 53 State Street, Boston, MA 02109. Goodwin Procter (UK) LLP is a separate limited liability partnership registered in England and Wales with registered number OC362294. Its registered office is at Tower 42, 25 Old Broad Street, London EC2N 1HQ. A list of the names of the members of Goodwin Procter (UK) LLP is available for inspection at the registered office. Goodwin Procter (UK) LLP is authorized and regulated by the Solicitors Regulation Authority.