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How eXaCtLy SHouLd your CLieNt ’ S Broker Be regiStered ?
Securities Section Chairs : Rob Jamieson – Wiand Guerra King & Matthew Schwartz – Cole Scott Kissane
Although the SEC and the Florida legislature have recently clarified the regulatory regime for business brokers in Florida , Florida attorneys and business owners often remain perplexed about the applicable licensing requirements . Fortunately , the governing rules are now , for the first time , neatly housed in just two locations .
In its July 31 , 2014 “ No Action Letter ,” which was amended February 4 , the SEC ’ s Division of Trading and Markets clarified the historically controversial exemption from broker-dealer registration under Section 15 ( b ) of the Exchange Act . This guidance , commonly referred to as the “ M & A Brokers ” letter , lays out a safe harbor for brokers selling a “ control ” interest in a privatelyheld company to an “ active ” buyer ( or group of buyers not
Business brokers can charge up-front fees , retainers , and transaction-based success fees without registering as a broker-dealer at either the federal or state level .
pooled by the M & A broker ). Both “ active ” and “ control ” are well-defined in the letter as part of ten enumerated criteria forming a conjunctive test that an unregistered M & A broker must pass to legally sell equity interests in a business and collect a success fee tied to the value of the transaction without any involvement of the SEC or FINRA .
Shortly after the SEC issued its M & A No Action Letter , the North American Securities Administrators Association issued its Model Rule for states on this matter . Florida adopted the rule , effective July 1 , 2016 , as section 517.12 ( 22 ), Florida Statutes . The new provision largely parallels the SEC ’ s guidance but provides relief from registration as a broker or dealer under our state securities laws . The biggest difference between the two is , unlike the SEC ’ s guidance , which applies to the sale of any privatelyheld entity , the state law limits the exemption to transactions involving target companies that had less than $ 25 million in EBITDA or less than $ 250 million in gross revenue ( with inflationary adjustments ) in the fiscal year immediately preceding the fiscal year during which the M & A broker begins to provide its services .
For our business-owning clients in Florida , securities regulations are now clear , if not well-known . Business brokers can charge up-front fees , retainers , and transaction-based success fees without registering as a brokerdealer at either the federal or state
© Can Stock Photo / gina _ sanders
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Looking for more referrals ? Join the HCBa Lawyer referral & information Service . Call ( 813 ) 221-7780 for more information . ( Spanish-speaking attorneys especially needed .)
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