A picture of Representative Terri A. Sewell
Terri S.
Democrat AL 7

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  • Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013

    by Representative Terri A. Sewell

    Posted on 2014-01-14

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    SEWELL of Alabama. Mr. Speaker, I yield myself such time as I may consume.

    Today, I rise in support of H.R. 2274, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013.

    H.R. 2274 provides a much-needed exemption and clarification for current M&A brokers who perform services in connection with the transfer and ownership of small- and medium-sized businesses in privately negotiated transactions.

    Small- and medium-sized businesses play a critical role in our economy. They provide jobs, they spur innovation, and they strengthen our overall economy. In fact, over the past decade and a half, America's small businesses and entrepreneurs have created 65 percent of all new jobs in this country.

    As businesses grow, many small- and medium-sized businesses reach a point where they want to and need to expand their businesses. They turn to mergers and acquisition professionals to facilitate such sales.

    Currently, M&A brokers who facilitate the private sale of small- and medium-sized privately owned companies must register with the SEC. SEC registration as a broker also requires membership in FINRA--the Financial Industry Regulatory Authority.

    The burdens and costs of initial broker-dealer registration and ongoing compliance with both SEC and FINRA requirements are substantial. These costs adversely impact and unnecessarily increase the costs that business owners incur to sell, buy, or grow their small- and medium-sized businesses.

    H.R. 2274 is a legislative acknowledgement that one size does not, indeed, fit all when it comes to transactions. Prior to my election, I was a securities lawyer with over a decade of experience working in capital markets for a Wall Street law firm. I had the opportunity to work on a variety of transactions.

    Not all mergers and acquisitions are alike, and so not all require the same type of registration and requirements. Some transactions are privately negotiated transmissions of relatively small dollar amounts with sophisticated investors, not for public sale. By streamlining and simplifying the regulatory structures of these small- and medium-sized businesses, we allow them to safely, efficiently, and effectively sell their companies while preserving growth and protecting jobs in these companies.

    [[Page H194]] This bill, H.R. 2274, allows smaller privately held companies to save time and money on the services rendered during the transfer of ownership allowing for smooth sale and transfer. To qualify for the exemption, the transaction would have to involve a business with less than $250 million in gross revenues and/or pre-tax earnings of less than $25 million with no securities, and the buyer of the business is someone who will actively manage and control the business, either directly or indirectly.

    I fully support this bipartisan legislation and its efforts to simplify the regulatory structure in the sale and transfer of ownership of small- and medium-sized businesses in privately negotiated transactions.

    This reform was welcomed by regulators and passed, as the chairman of the subcommittee so accurately noted, by a vote of 57-0, unanimously, with full bipartisan support. The ABA Private Placement Broker-Dealer Task Force recommended this change in its 2005 report, which is available on the SEC Web site. Similar recommendations to simplify broker-dealer registration for M&A brokers were made in the final report by the advisory committee to the SEC on small business companies in 2006.

    I think appropriately scaling Federal registration of M&A brokers is a good thing. It is something that I would not only support, but encourage my colleagues to support as well.

    H.R. 2274 would amend the Exchange Act by adding a new subsection, section 15, which would govern broker-dealer registration. The amendment would cut regulatory costs incurred by sellers and buyers of small-and mid-sized privately held companies in privately negotiated transactions.

    Federal law would continue to provide important investor protections through the SEC registration and SEC regulation of the capital, custody, margin, recordkeeping, bonding, and operational reporting requirements applicable to M&A brokers, and existing State security laws will continue to apply.

    {time} 1245 I think that this is sensible legislation that should be supported by both sides of the aisle. I am indeed honored to stand with my colleagues in support of H.R. 2274.

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