A New Federal Exemption from Broker Registration for Qualifying M&A Brokers Became Effective on March 29, 2023 (Prior SEC No-Action Relief Has Been Withdrawn)

Although the New Federal Exemption Is Generally Aligned with the SEC’s 2014 No-Action Relief, There Are Some Notable Differences. Moreover, State Law Registration Requirements for M&A Brokers Are Not Preempted.

The U.S. Congress recently enacted a conditional exemption (the “Exemption”) from registration under Section 15(b) of the Securities Exchange Act of 1934 for qualifying brokers that facilitate merger and acquisition (“M&A”) transactions involving certain privately held companies. The Exemption essentially is a codification of relief for certain M&A brokers from the Exchange Act’s broker registration requirements that the staff of the Division of Trading and Markets of the U.S. Securities and Exchange Commission (“SEC”) previously granted in a 2014 no-action letter (“2014 NAL”). However, the Exemption is narrower in that it imposes limitations on the size of the privately held company that is the subject of an M&A transaction. The Exemption became effective on March 29, 2023; that same day, the SEC staff withdrew the 2014 NAL effective immediately.

In this Legal Update, we provide an overview of the Exemption and certain practical considerations, including considerations under state securities laws.