Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Tuesday, November 26, 2013

House Committee Passes Law Reducing Business-Broker Regulation

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.
This blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting SEC registration statements, Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, 1933 Act registration statements on Form S-1, S-8 and 1934 Act registration statements on Form 10, OTC Pink Sheet listings, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855 
www.SecuritiesLawyer101.com

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