United States: Goodbye M&A Brokers No Action Letter, Hello Federal Exemption

By Eden L. Rohrer and Jessica D. Cohn

On 29 March 2023, the federal exemption from securities broker registration for qualifying mergers and acquisitions brokers (M&A brokers) became effective. That exemption was signed into law on 29 December 2022 as a policy rider to the Consolidated Appropriations Act of 2023 (H.R. 2617) (the M&A Brokers Exemption) and was described in our previous blog post and client alert

The M&A Brokers Exemption can now be found in subsection (13) “Registration Exemption for Merger and Acquisition Brokers” of Section 15(b) of the Securities Exchange Act of 1934.

Since the adoption of the M&A Brokers Exemption, there has been much speculation about whether the Securities and Exchange Commission (SEC) would withdraw the SEC M&A Brokers No-Action Letter (January 31, 2014, amended February 4, 2014) (the M&A Brokers NAL). The M&A Brokers Exemption is essentially the codification of the M&A Brokers NAL with certain inconsistencies, most notably the size of eligible privately held companies. That speculation has been put to rest as today, 29 March 2023, the SEC formally withdrew the M&A Brokers NAL. Accordingly, M&A brokers may only qualify for exemption from securities broker registration by satisfaction of the terms of the M&A Brokers Exemption, including that they are engaged in effecting securities transactions for privately held companies that have EBITDA less than $25 million and/or gross revenues less than $250 million.

It is still unclear whether the North American Securities Administrators Association will also amend its model rule or whether state securities regulators will amend existing rules or adopt new rules consistent with the M&A Brokers Exemption. 

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