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Alternative Market Briefing

SEC allows some M&A brokers to operate without SEC registration (Part 1)

Monday, March 10, 2014

Bailey McCann, Opalesque New York:

There may be a glimmer of hope for investment firms when it comes to new financial regulations. In February, the SEC released a significant no-action letter for M&A brokers, and indeed the investment management industry. The letter effectively permits an M&A Broker who complies with all applicable conditions to receive transaction-based compensation for facilitating mergers, acquisitions, business sales, and business combinations between sellers and buyers of privately-held companies without registering as a broker with the SEC, regardless of the size of the transaction.

The change is notable, as many of these activities were previously covered under a more restrictive, "country business" rule which limited both the activities of an M&A broker as well as the size of the transactions. "This is new because the SEC was unequivocal that being involved in a transaction in this way would make you a broker and require for you to register," explains Faith Colish, Counsel with Carter Ledyard & Milburn LLP, to Opalesque. Carter Ledyard was one of the leading firms involved in the no-action letter. "Previously, there were some allowances under the Country Business no-action letter, but this new M&A Broker letter goes much further."

"This has broadened Country Business which was a no-action letter issued by the SEC in late 2006. Countr......................

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