[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 3391 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 3391
To amend the Securities Exchange Act of 1934 to establish a
registration exemption for merger and acquisition brokers, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 14, 2021
Mr. Kennedy introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to establish a
registration exemption for merger and acquisition brokers, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Mergers,
Acquisitions, Sales, and Brokerage Simplification Act of 2021''.
SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND ACQUISITION BROKERS.
(a) In General.--Section 15(b) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(b)) is amended by adding at the end the following:
``(13) Registration exemption for merger and acquisition
brokers.--
``(A) Definitions.--In this paragraph:
``(i) Business combination related shell
company.--The term `business combination
related shell company' means a shell company
that is formed by an entity that is not a shell
company solely for the purpose of--
``(I) changing the corporate
domicile of that entity solely within
the United States; or
``(II) completing a business
combination transaction (as defined in
section 230.165(f) of title 17, Code of
Federal Regulations, or any successor
regulation) among not less than 1
entity other than the company itself,
none of which is a shell company.
``(ii) Control.--
``(I) In general.--The term
`control' means the power, directly or
indirectly, to direct the management or
policies of a company, whether through
ownership of securities, by contract,
or otherwise.
``(II) Presumption.--For the
purposes of subclause (I), there shall
be a presumption of control if, upon
completion of a transaction, a buyer or
group of buyers--
``(aa) has the right to
vote 25 percent or more of a
class of voting securities or
the power to sell or direct the
sale of 25 percent or more of a
class of voting securities; or
``(bb) in the case of a
partnership or limited
liability company, has the
right to receive upon
dissolution, or has
contributed, 25 percent or more
of the capital.
``(iii) Eligible privately held company.--
The term `eligible privately held company'
means a privately held company that meets both
of the following conditions:
``(I) The company does not have any
class of securities--
``(aa) registered, or
required to be registered, with
the Commission under section
12; or
``(bb) with respect to
which the company files, or is
required to file, periodic
information, documents, and
reports under subsection (d).
``(II)(aa) In the fiscal year
ending immediately before the fiscal
year in which the services of an M&A
broker are initially engaged with
respect to a securities transaction,
the company meets either of the
following conditions (determined in
accordance with the historical
financial accounting records of the
company):
``(AA) The earnings of the
company before interest, taxes,
depreciation, and amortization
are less than $25,000,000.
``(BB) The gross revenues
of the company are less than
$250,000,000.
``(bb) For purposes of this
subclause, the Commission may, by rule,
modify the dollar figures in subitem
(AA) or (BB) of item (aa) if the
Commission determines that such a
modification is necessary or
appropriate in the public interest or
for the protection of investors.
``(iv) M&A broker.--The term `M&A broker'
means a broker, and any person associated with
a broker, engaged in the business of effecting
securities transactions solely in connection
with the transfer of ownership of an eligible
privately held company, regardless of whether
the broker acts on behalf of a seller or buyer,
through the purchase, sale, exchange, issuance,
repurchase, or redemption of, or a business
combination involving, securities or assets of
the eligible privately held company, if the
broker reasonably believes that--
``(I) upon consummation of the
transaction, any person acquiring
securities or assets of the eligible
privately held company, acting alone or
in concert--
``(aa) will control the
eligible privately held company
or the business conducted with
the assets of the eligible
privately held company; and
``(bb) directly or
indirectly, will be active in
the management of the eligible
privately held company or the
business conducted with the
assets of the eligible
privately held company,
including without limitation,
by--
``(AA) electing
executive officers;
``(BB) approving
the annual budget;
``(CC) serving as
an executive or other
executive manager; or
``(DD) carrying out
such other activities
as the Commission may,
by rule, determine to
be in the public
interest; and
``(II) if any person is offered
securities in exchange for securities
or assets of the eligible privately
held company, that person will, before
becoming legally bound to consummate
the transaction, receive or have
reasonable access to--
``(aa) the most recent
fiscal year-end financial
statements of the issuer of the
securities, as customarily
prepared by the management of
the issuer in the normal course
of operations; and
``(bb) if the financial
statements of the issuer are
audited, reviewed, or
compiled--
``(AA) any related
statement by the
independent accountant;
``(BB) a balance
sheet dated not more
than 120 days before
the date of the offer;
and
``(CC) information
pertaining to the
management, business,
results of operations
for the period covered
by the foregoing
financial statements
and material loss
contingencies of the
issuer.
``(v) Shell company.--The term `shell
company' means a company that, as of the date
of a transaction with an eligible privately
held company--
``(I) has no or nominal operations;
and
``(II) has--
``(aa) no or nominal
assets;
``(bb) assets consisting
solely of cash and cash
equivalents; or
``(cc) assets consisting of
any amount of cash and cash
equivalents and nominal other
assets.
``(B) Exemption.--Except as provided in
subparagraph (C), an M&A broker shall be exempt from
registration under this section.
``(C) Excluded activities.--An M&A broker is not
exempt from registration under this paragraph if the
M&A broker does any of the following:
``(i) Directly or indirectly, in connection
with the transfer of ownership of an eligible
privately held company, receives, holds,
transmits, or has custody of the funds or
securities to be exchanged by the parties to
the transaction.
``(ii) Engages on behalf of an issuer in a
public offering of any class of securities--
``(I) that is registered, or is
required to be registered, with the
Commission under section 12; or
``(II) with respect to which the
issuer files, or is required to file,
period information, documents, and
reports under subsection (d).
``(iii) Engages on behalf of any party in a
transaction involving a shell company, other
than a business combination related shell
company.
``(iv) Directly, or indirectly through any
of its affiliates, provides financing relating
to the transfer of ownership of an eligible
privately held company.
``(v) Assists any party to obtain financing
from an unaffiliated third party without--
``(I) complying with all other
applicable laws in connection with such
assistance, including, if applicable,
part 220 of title 12, Code of Federal
Regulations, or any successor
regulations; and
``(II) disclosing any compensation
in writing to the party.
``(vi) Represents both the buyer and the
seller in the same transaction without--
``(I) providing clear written
disclosure with respect to the parties
the broker represents; and
``(II) obtaining written consent
from both parties to the joint
representation.
``(vii) Facilitates a transaction with a
group of buyers formed with the assistance of
the M&A broker to acquire the eligible
privately held company.
``(viii) Engages in a transaction involving
the transfer of ownership of an eligible
privately held company to a passive buyer or
group of passive buyers.
``(ix) Binds a party to a transfer of
ownership of an eligible privately held
company.
``(D) Disqualification.--An M&A broker is not
exempt from registration under this paragraph if the
M&A broker (and, as applicable, any officer, director,
member, manager, partner, or employee of the M&A
broker)--
``(i) has been barred from association with
a broker or dealer by the Commission, any
State, or any self-regulatory organization; or
``(ii) is suspended from association with a
broker or dealer.
``(E) Rule of construction.--Nothing in this
paragraph may be construed to limit any other authority
of the Commission to exempt any person, or any class of
persons, from any provision of this title, or from any
provision of any rule or regulation thereunder.
``(F) Inflation adjustment.--
``(i) In general.--On the date that is 5
years after the date of enactment of this
paragraph, and every 5 years thereafter, each
dollar amount in subparagraph (A)(iii)(II)(aa)
shall be adjusted by--
``(I) dividing the annual value of
the Employment Cost Index For Wages and
Salaries, Private Industry Workers (or
any successor index), as published by
the Bureau of Labor Statistics, for the
calendar year preceding the calendar
year in which the adjustment is being
made by the annual value of such index
(or successor) for the calendar year
ending December 31, 2020; and
``(II) multiplying such dollar
amount by the quotient obtained under
subclause (I).
``(ii) Rounding.--Each dollar amount
determined under clause (i) shall be rounded to
the nearest multiple of $100,000.''.
(b) Effective Date.--The amendments made by subsection (a) shall
take effect on the date that is 90 days after the date of enactment of
this Act.
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