SEC Tells M&A Brokers: No Registration Required

Late last month, the Securities and Exchange Commission gave M&A brokers a green light to facilitate mergers, acquisitions, and other business sales and combinations without first having registered as “broker-dealers.” Attorneys from Skadden Arps explain:

“Prior to the No-Action Letter, although a person who had not registered as a broker-dealer could engage in activities in connection with the sale of a business structured as an asset sale, unregistered persons generally were not permitted to effect the sale of a business structured as a securities sale. As a result, unregistered persons generally were not permitted to engage in activities such as negotiating on behalf of buyers and sellers, participating in the sale of a privately-held company or providing advice relating to the issuance or value of securities in connection with the sale of such a company. Although subject to many conditions and limitations, the No-Action Letter has significantly expanded the limited relief that the SEC previously had given in connection with such sales.”

Three key takeaways, from attorneys Brett Ackerman, Dana Fleischman, and Stephen Wink of Latham & Watkins:

“First, the Letter follows the trend begun in no-action letters issued last year to AngelList and FundersClub that indicates a certain thawing of the Trading and Markets staff’s views on what constitutes broker-dealer activity for purposes of the registration requirements of Section 15(a) of the Exchange Act.

Second, the Letter follows last year’s public comments by David Blass, Chief Counsel of the SEC’s Division of Trading and Markets, in which Blass highlighted issues related to payments in connection with private placements and investment banking transactions that implicate the broker-dealer requirements … and the Letter may portend developments in this area.

Finally, however, a word of caution. Although some industry participants appear to have read more into the relief granted in the Letter, it remains narrowly tailored and focused on the ‘business broker’ constituency. […] [T]he Letter is also subject to a number of specific conditions.”

For your reference, here’s a roundup of recent updates on the SEC no-action letter:

Read more on the Securities and Exchange Commission at JD Supra Business Advisor>>