US M&A Brokers registration?

[congregatio]

According to the no-action letter, an "M&A Broker" is limited to "effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company."

There are a number of conditions in the no-action letter that the Division expects an M&A Broker to meet. The key conditions that the Division listed are as follows:

1. The M&A Broker will not have the ability to bind a party to an M&A transaction;
2. The M&A Broker will not provide financing for an M&A transaction;
3. The M&A Broker will not have custody, control, or possession of securities or funds in connection with the M&A transaction;
4. No party to the M&A transaction will be a shell company, other than a business combination related shell company;
5. The M&A transaction will not involve a public offering and is exempt from registration;
6. If the M&A Broker represents both buyers and sellers, it will provide clear written disclosure as to the parties it represents and obtain written consent from both parties to the joint representation;
7. The M&A Broker will not assist in the formation of a group of buyers for M&A transactions that it facilitates;
8. The buyers or group of buyers will, upon completion of the M&A transaction, control and actively operate the company or the business conducted with the assets of the business;
9. The M&A transaction will not result in the transfer of interests to a passive buyer or group of buyers;
10. The securities received by the buyer will be restricted securities; and
11.

The M&A Broker and its officers, directors, and employees have not been:

Barred from association with a broker-dealer by the SEC, any state or any self-regulatory organization; or
Suspended from association with a broker-dealer.

[alefdracon]

Foreign M&A Brokers have also been granted relief from broker-dealer registration. In a no-action letter issued in May 2013, the Division provided guidance allowing for a foreign person to interact with a U.S. target company in establishing and developing an M&A transaction without facing broker-dealer registration if:

1. The U.S. target is using internal or group-level personnel with relevant M&A experience or an external advisor, such as a broker-dealer or other relevant professional;
2. The foreign M&A Broker does not receive, acquire, or hold funds or securities in connection with the transaction;
3. The foreign M&A Broker does not represent or advise the U.S. target company in any regard with respect to the transaction; and
4. The M&A Broker complies with the antifraud provisions of the U.S. securities laws.12

It is important to note that the foreign M&A Broker who requested no-action relief also made the representation that it would approach only "Major U.S. Institutional Investors," as defined in Rule 15a-6(b)(4) under the Exchange Act.