Licensure

January, 2017

RALLY CONGRESS - SEND A LETTER TO YOUR US REPRESENTATIVE FOR THEIR SUPPORT OF HR 477

July, 2016

RALLY CONGRESSSEND A LETTER TO YOUR US REPRESENTATIVE FOR THEIR SUPPORT OF HR 686

Highlights and History of HR 686 - S 1010 Summary  - The Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act

Join the Campaign for Clarity Club (updated 7-18-16) - See Members Here




Make your contribution to the "Campaign for Clarity" Licensure Fund

December, 2015
Private Placement Brokers - The State of Play Two Years Later

By Linda Lerner and Eden Rohrer

October 15, 2015

On September 29, at its annual conference the North American Securities Administrators Association (NASAA) formally adopted a Model State Rule which, if adopted by each state, will exempt M&A Brokers from having to register as securities brokers at the state level.  Complete text of NASAA's Model Rule.

August 18, 2015

“….In March 2015 FINRA adopted Rule 2040 that becomes effective on August 24, 2015, which permits FINRA members to share fees with non-FINRA members under certain conditions.  One clearly specified condition is when the SEC has issued a No Action letter that clearly specifies when the non-FINRA member’s activities do not require registration with the SEC, and therefore do not require FINRA membership.

SEC M&A Broker No Action Letter dated January 31, 2014

February 18, 2015

SEC Approves FINRA Rule 2040, Payments to Unregistered Persons

On September 10, 2014, FINRA proposed Rule 2040, permitting the payment of transaction based compensation by members to unregistered persons.

On December 30, 2014, the SEC approved FINRA Rule 2040.

 

Here's a link to the SEC's approval of proposed FINRA Rule 2040: SEC Approves FINRA Rule 2040, Payments to Unregistered Persons

 

As well as a link to a highlighted copy of the Federal Register notice explaining the rule changeFINRA Proposed Rule 2040, Payments to Unregistered Persons


Prior to Rule 2040, FINRA has generally prohibited the payment of commissions or fees derived from a securities transaction based compensation to any non-member that may be acting as an unregistered broker-dealer.  

 

Under Rule 2040, persons would look to SEC rules and regulations to determine whether the activities in question require registration as a broker-dealer under Section 15(a) of the Exchange Act.  Persons may also rely on related published guidance issued by the SEC and or its staff in the form of releases, no action letters and interpretations. 

 

As of this writing, no effective date for Rule 2040 has been published by FINRA, but this is clearly a giant step forward.

 

It should promote a more efficient capital market for privately-held businesses by by facilitating the referral of capital raising projects and larger M&A transactions up the ladder to fully registered broker-dealers, and the referral of smaller M&A transactions to M&A brokers who need not be registered broker-dealers.  

 

January 17, 2015

It's been a banner week in Washington, DC, for the Campaign for Clarity!
On Thursday, the North American Securities Administrators Association (NASAA) posted its proposed model state rule on its website and requested public comment.
A link to the full text of their posting and proposed rule is:

 Notice of Request for Public Comment on a Proposed NASAA Model Rule Exempting Certain Merger and Acquisition Brokers from State Registration

The text of NASAA's proposed state rule follows very closely the text of HR 2274 (now HR 37, Title IV) with the additional language we expected to prohibit "bad boys" and facilitating reverse mergers with public shells.
We expect these modifications will be taken up when the companion bill is marked up in the Senate.
Support is clearly building at both the federal and state levels for this long awaited clarification of when business brokers and M&A advisors must register as securities broker-dealers to comply with federal and state securities laws.
2015 seems to be the year when this will finally come together.  Now is the time to contribute your fair share to fund and be recognized as a sponsor of this historic initiative.

December 26, 2014

North American Securities Administrators Association (NASAA) Moves Ahead with Drafting of Model State Rules

Shane Hansen, partner with the law firm of Warner Norcross & Judd and lead counsel on the Campaign for Clarity, reports that:

"NASAA is proceeding with drafting its model M&A broker rule, with an understanding that the [SEC M&A Broker No Action Letter] exists today but that it is anticipated the legislation will be reintroduced in the 114th Congressional session..." where by NASAA's own observation, "...it has a strong likelihood of passing..."  

To this end, NASAA asked Shane for a comparison between the SEC M&A Broker No Action Letter (NAL) and the legislation.

Here's a link to the complete text of Shane's white paper, summarizing the current status update and comparing the specifics in the NAL which is in effect today, and the bill which is expected to be re-introduced early in the 114th Congress.

WNJ Update & Comparison - SEC MAB NAL and HR 2274 - S 1923

EMAIL YOUR U.S. SENATOR NOW!

Your U.S. Senators urgently need to hear from YOU that this bill is important to you, and to buyers and sellers of privately held businesses in your state.

The Small Business Investors Alliance (SBIA) has been - and continues to be - very supportive of this legislation and has created the following hotlink to make it easy of you to email your US Senators with a prepared letter urging them to support S 1923. Email your U.S. Senators NOW!

This letter has recently been updated to include
•An embedded link to our 1-page brief on HR 2274, and now S1923, along with a copy of the text of the bill, and
•Specific mention of IBBA and M&A Source as named co-sponsors of this important legislation

TIME IS OF THE ESSENCE! DO IT NOW!

January 31, 2014

On January 31, the SEC released a sweeping No Action Letter regarding M&A Brokers.

This letter represents the latest in a series of major milestones to clarify and simplify the complex, overlapping and unduly burdensome regulations that can impact buyers and sellers of privately held businesses, and the professionals who seek to assist them.

In a nutshell, business brokers and M&A advisors who operate within the bright guidelines of the M&A Brokers No Action Letter will be exempt from registering with the SEC as a broker-dealer, regardless of the size of the transaction.

More work is needed to make this exemption permanent, and that's why we still need your help in getting Congress to pass S 1923.

January 15, 2014

H.R. 2274 has passed the House by a unanimous vote!!

Yesterday, the US House of Representatives UNANIMOUSLY passed HR 2274 by a vote of 422-0! As I’m certain you can appreciate, this level bipartisan support is very rare in Washington, DC, these days.

Late yesterday, a bipartisan companion bill was introduced in the US Senate by Senator Joe Manchin, III, (D WV) and Senator David Vitter (R LA). The Senate bill has been designated S 1923, a bill to amend the Securities Exchange Act of 1934 to exempt from registration brokers performing services in connection with the transfer of ownership of smaller privately held companies.

January 11, 2014

H.R. 2274 is scheduled to be voted on by the full House this coming Tuesday!

HR 2274 has been put on the Suspension Schedule for Tuesday of this coming week.

“Suspension of the rules*” is a procedure generally used to quickly pass non-controversial bills in the United States House of Representatives.

This is a major, major milestone for HR 2274 and the Campaign for Clarity, and a cause for brief celebration, but there is more work to be done.

Once HR 2274 is passed by the House, it is sent to the Senate where it will be referred to the Senate Banking, Housing and Urban Affairs Committee and specifically its Subcommittee on Insurance, Securities and Investments, where the committee process begins again. The subcommittee may hold hearings and receive other testimony, and ultimately – hopefully – schedule a mark-up of the bill before the full committee, where amendments to the bill may be considered. If the bill is favorably voted out of committee, it must be voted on by the full Senate before being forwarded to the President for signature.

We are in the process of reaching out to a half dozen key Senators who serve on the right committees and who have expressed a willingness to consider co-sponsoring an identical, companion bill in the Senate. Once a bill gets introduced in the Senate, or HR 2274 arrives in the Senate for consideration, we will be asking you to reach out to your US Senators to request their support for this bill.

November 15, 2013

HR 2274 as amended was passed by a UNANIMOUS (57-0) vote by the House Financial Services Committee.

Procedurally, this was done with something known in Congress as an Amendment in the Nature of a Substitute (AINS). Effectively, this means that the original bill is replaced in its entirety with an new bill, that is still called HR 2274.

The bill also acquired a new subtitle, which now reads: “A bill to amend the Securities Exchange Act of 1934 to exempt from registration brokers who provide services in connection with the transfer of ownership in smaller privately held companies”

A copy of the AINS language can be viewed here, and this is exactly what the HFSC voted on and passed 57-0, and this is the bill known as HR 2274 that has been reported out of committee and is awaiting a vote of the full House.

AM&AA Testifies Before Congress In Support of HR 2274

Congressional Committee hears testimony on the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013

Washington, DC – AM&AA today testified before Congress, and specifically the U.S. House Committee on Financial Services Capital Markets subcommittee, in support of the bipartisan Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act (HR 2274).

Mr. Mike Ertel, Co-Chair of the AM&AA Licensure Task Force, joined a distinguished panel of experts in the financial services industry as the Capital Markets subcommittee members asked the panel questions on how HR 2274 would affect the millions of owners and buyers of small, privately held businesses, and the thousands of small business professionals who facilitate the sale/purchase of these small, private businesses.

HR 2274 would simplify and reduce the costs of 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 (earnings are defined as EBITDA which stands for Earnings Before Interest, Taxes and Depreciation) and revenue of less than $250 million to active buyers.

"There is a big difference between the sale of a small business to a buyer who will be active in managing the business after the sale and the sale to passive investors of securities of a publicly-traded company on the New York Stock Exchange. Current law does not distinguish between these two activities – and it should. It's time for Washington to define the differences. HR 2274 does just that," said Michael Nall, president, AM&AA.

HR 2274 would lower costs, increase compliance, and better serve buyers and sellers of small businesses. It is a bill that promotes economic development, job creation, and provides important, immediate, and substantial relief of regulatory burdens on small business professionals in the critical M&A industry.

Wednesday's congressional hearing on HR 2274 was an important rung on the ladder to the full Congress considering this important bipartisan legislation.
As of this writing, the following US Representatives have agreed to co-sponsor this bill:

Congressman Bill Huizenga (R MI-2)
Congressman Bill Posey (R FL-8)
Congressman Brian Higgins (D NY-26)
Congressman Joe Heck (R NV-3)
Congressman David Schweikert (R AZ-6)
Congressman Stephen Fincher (R TN-8)
Congressman Dennis Ross (R FL-15)
Congressman Patrick McHenry (R NC-10)
Congressman Frank Lucas (R OK-3)
Congresswoman Zoe Lofgren (D CA-19)

M&A Broker Bill Introduced to US House - Bill H.R. 2274

On Wednesday, June 6, 2013, we received word from Congressman Bill Huizenga’s (R MI-02) office that our M&A Broker bill was officially introduced in the US House of Representatives, and was designated

H.R. 2274, THE SMALL BUSINESS MERGERS, ACQUISITIONS, SALES AND BROKERAGE SIMPLIFICATION ACT OF 2013, A Bill to Reduce Regulatory Costs and Burdens on the Sale of Privately Owned Businesses, which was immediately referred to the House Financial Services Committee (HFSC).

Clearly we’ve accomplished a lot, but to significantly increase the chances of H.R. 2274 passing both houses of Congress and being signed into law by the President we need to do redouble our efforts to:
•Recruit additional US Congressmen – especially members of the House Financial Services Committee – and especially members of the Subcommittee on Capital Markets, and especially Democrats – to co-sponsor/support H.R. 2274, or at least vote for it when it comes to a vote.

View the video of Shane Hansen's presentation to the House of Representatives here.

PROCEDURE FOR CONTACTING YOUR US SENATOR

•Reach out to US Senators (see link to the left) and educate them about this issue, and request their support in co-sponsoring this bill in the US Senate. The successful procedure for contacting your US Senators is very similar to the procedure outlined in reaching out to US Representatives.
◦Every state has two US Senators, whose job it is to represent your interest in the US Senate. Whether Republican or Democrat, whether or not your contributed to their election campaign, whether or not you voted for or against them in the last election – or didn’t vote at all – they work for you, and their job is to represent you.
◦If you already know someone in the Senators’ offices, work through your existing contact(s).
•If not, call their office in Washington, DC, (Contact info is in the attached Excel file “US Senators” in the link to the left) and ask to speak with their Legislative Director, or the legislative assistant who handles “financial services legislation.”
•Once you’re speaking with that person, make a note of their name, introduce yourself and explain that you’d like to send them some information about a bill that you’d like the Senator to support, and get their e-mail address. (For internet security reasons, some Congressional offices will only accept faxes, in which case, get their fax number.)
•E-mail the 1-page summary of HR 2274 (see link to the left) and the text of the full bill (see link to the left), with a cover note stating that you are a business broker/ M&A advisor and you would like very much for the Senator to introduce/co-sponsor this bill in the Senate.
•From time to time you may need to follow up with a phone call or an e-mail to the legislative aide/director to make certain you get the Senators’ commitments.

PROCEDURE FOR CONTACTING YOUR US REPRESENTATIVE

•The procedure for contacting your US Representative(s) (see attached list below) is very similar to the procedure for US Senators with two important distinctions:
◦Every state is divided into congressional districts and there is one representative from each district. If you don’t know your US Representative, you can easily find out by entering your zip code in the Find Your Representative service in the upper right hand corner of the official US House of Representatives webpage: www.house.gov
◦If your representative does not serve on the House Financial Services Committee (HFSC), but other representatives from your state do serve on the HFSC, they will generally be receptive to your call about an issue that is before their committee, such as our bill, HR 2274.
•From here on the process is identical: If you already know someone in the Congressman’s office, work through your existing contact(s).
•If not, call their office in Washington, DC, (Contact info is in the attached Excel file “US Representatives” in the link to the left) and ask to speak with their Legislative Director, or the legislative assistant who handles “financial services legislation.”
•Once you’re speaking with that person, make a note of their name, introduce yourself and explain that you’d like to send them some information about a bill that you’d like the Representative to support, and get their e-mail address. (For internet security reasons, some Congressional offices will only accept faxes, in which case, get their fax number.)
•E-mail the 1-page summary of HR 2274 (see link to the left) and the text of the full bill (see link to the left), with a cover note stating that you are a business broker/ M&A advisor and you would like very much for the Representative to co-sponsor this bill in the House.
•From time to time you may need to follow up with a phone call or an e-mail to the legislative aide/director to make certain you get the Congressman’s commitment.
•Keep in mind that your US Representative’s job it is to represent your interests in the US House of Representatives. Whether Republican or Democrat, whether or not your contributed to their election campaign, whether or you voted for or against them in the last election – or didn’t vote at all – they work for you, and their job is to represent you.

Board Contacts

If you have any questions/suggestions, or if we can ever be of any assistance on this matter please contact:

Mike Ertel
Managing Director
Legacy M&A Advisors
(888) 864-6610
mertel@lmaallc.com

Jim Cornell
President
Praxiis Advisors
(716) 675-6001, x.223
cornelljim@aol.com

Bob Gurrola
President
SUMMA Financial Group
(408) 677-3012
rgurrola@summallc.com

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