New Development in Federal M&A Broker Legislation

On February 3, 2015, H.R. 686, a bill creating a registration exemption for M&A Brokers, was introduced in the House of Representatives and referred to the Committee on Financial Services. This new bill is identical to Section 401 of H.R. 37, which included other financial regulations and had passed the House on January 14, 2015. H.R. 686 essentially duplicates the M&A Broker section – Section 401 of H.R. 37. Introducing this M&A Broker proposal as its own bill could signal a possible lack of confidence of behalf of lawmakers that an adequate amount of votes are available to pass H.R. 37 in the Senate and a hope that Section 401 can make it on its own and become law.

As discussed in previous posts, the M&A Broker exemption proposed by Congress in H.R. 37 – and now in H.R. 686 – fails to address the “grey area” of unregistered actors who participate in private placement of securities that are not M&A transactions. These Private Placement Brokers play an important and integral part for smaller businesses trying to raise capital. Having the M&A Broker exemption on its own in H.R. 686, and not with other significant financial regulations, may allow for amendments to be added more easily. Hopefully one of those amendments would be a Private Placement Broker exemption.