Update on the BIEF Campaign for Clarity

On September 11th, a subcommittee of the House Financial Services Committee (HFSC) held a public hearing on various bills, including HR 609, The Small Business Mergers, Acquisitions, Sales and Brokerage Simplification Act of 2019.

In its memo announcing this hearing, the Financial Services Committee staff summarized HR 609 as follows: This bill would codify an SEC no-action letter by exempting certain merger and acquisition brokers from registration as broker-dealers. Under the bill, M&A brokers are defined as brokers that facilitate the transfer of ownership of privately held companies with earnings [EBITDA] of less than $25 million or revenues of less than $250 million annually (these levels are adjusted for inflation every 5 years). This bill is identical to H.R. 477 from the 115th Congress, which passed the House by a vote of 426-0.

In its written testimony for this hearing, the North American Securities Administrators Association (NASAA) stated: The Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act (HR 609) would establish an exemption from registration requirements under federal securities laws for persons serving as brokers in certain merger and acquisition deals (“M&A brokers”). The exemption envisioned by the legislation is broadly consistent with a Model Exemption that NASAA approved in 2016, and with the de-facto federal policy that has existed since the issuance of a “no-action” letter by the Staff of the Commission on Feb. 4, 2014.  

State securities regulators share Congress’s interest in establishing a more streamlined regulatory framework for persons serving as M&A brokers in deals that involve the transfer of securities, subject to certain conditions. Moreover, we believe H.R. 609 appropriately balances the legitimate interests of all stakeholders, while maintaining significant safeguards for investors and small business owners.  

Further, while the framework established by H.R. 609 has been largely in place since 2014, federal legislation remains necessary due the limited legal effect of SEC staff “no-action” letters.  

NASAA supports H.R. 609, and we look forward to working with Ranking Member Huizenga and other members of the Subcommittee to facilitate its consideration and passage. 

In response to direct questions from Ranking Member Huizenga, the bill’s sponsor, the outgoing president of NASAA and a prominent New York securities attorney, confirmed their strong support for HR 609’s passage, noted that this regulatory relief was much needed and long overdue and included several additional investor protections.  They also affirmed that that this bill does not diminish the SEC’s ultimate authority to prosecute any fraud or misconduct by anyone involved in a securities transaction.

The full House Financial Services Committee (HFSC) is scheduled to meet beginning on October 29th and continuing on October 30th to mark-up various financial services bills – including we believe HR 609 – at which time additional amendments may be considered.  Once all amendments have been considered, the final bill will be voted up or down by the full committee.  With a favorable vote, the bill will then be sent to the floor of the House and scheduled for a final vote by the full House.  Upon passage by the full House, the bill will be sent to the Senate for its consideration.

Right now your US Senators need to hear from YOU that passing this bill is important to you, and thousands of private business owners in your state.

NO NEED TO LOOK UP YOUR SENATORS’ NAMES, ADDRESSES, AND HONORIFIC SALUTATIONS.  NO NEED TO COMPOSE YOUR OWN LETTER.  JUST CLICK HERE, AND ENTER YOUR HOME ZIP CODE, NAME AND HOME ADDRESS, AND EDIT /SEND AN EMAIL THAT HAS ALREADY BEEN DRAFTED FOR YOU! 

WHILE YOU’RE AT IT, SEND AN EMAIL FROM YOUR OFFICE ADDRESS AS WELL!

In closing, we would be remiss not to also ask you to consider a meaningful financial contribution to the Campaign for Clarity.  In the 13+ years since its inception, the Campaign has incurred legal and lobbying expenses in excess of one million dollars and raised well over $850,000 from voluntary contributions from individuals and firms like yours who recognize this is a rice bowl issue for our entire profession, as well as for the owners of privately held businesses whom we assist.

The not-for-profit, Business Intermediaries Education Foundation (BIEF) has taken the lead role in raising funds for this and other issues that concern the entire profession. While cash, check and credit card contributions are greatly appreciated, you may be more comfortable contributing something now, and pledging to contribute more in the future, perhaps tied to your next big closing.

For continuing information on the BIEF Campaign for Clarity, visit these websites:

https://www.masource.org/business-intermediary-education-foundation-bief/

https://www.biefoundation.org/support-hr-609/