There are a large number of limitations and requirements that must be satisfi ed for a person to claim M&A Broker (and, therefore, registration- exempt) status. They include the following:
1. That person must not have the ability to bind a party to a covered transaction.
2. That person may not directly or indirectly provide fi nancing for a covered transaction (and to the extent it assists purchasers in obtaining third- party fi nancing, it must comply with all applicable legal requirements and disclose any compensation in writing).
3. That person may not have custody, control or possession of or otherwise handle funds or securities issued or exchanged in connection with a covered transaction or other securities transaction for the account of others.
4. A covered transaction may not involve a public offering, must be conducted in compliance with an applicable exemption from registration under the Securities Act of 1933, and may not include a shell
company (with limited exceptions); any securities received by the buyer or that person in a covered transaction must be “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act of 1933.
5. If that person represents both buyers and sellers, all clients must receive clear written disclosure of the situation and provide written consent to the joint representation.
6. That person can only facilitate a transaction involving a group of buyers if the group was formed without the assistance of that person.
7. The buyer or buyers must control and actively operate the company or the business conducted with the assets of the business at the closing of the covered transaction.
8. That person (and, if an entity, each of its offi cers, directors or employees): (i) cannot be barred from association with a broker-dealer by the SEC, any state or any self-regulatory organisation; and (ii) cannot be suspended from association with a broker-dealer.
The no-action letter also noted that it was limited to the registration obligation and that other provisions of the federal securities laws, including but not limited to the anti-fraud provisions, would apply. THFJ
NOTES
1. In general, Section 3(c)(1) provides an exclusion for funds with 100 or fewer benefi cial owners that do not publicly offer their securities and Section 3(c)(7) provides an exclusion for funds that issue securities only to “qualifi ed purchasers” and that do not publicly offer their securities.
2. Available at
http://www.sec.gov/divisions/ investment/noaction/2014/managed-funds-
association-020614.htm.
3. Available at
http://www.srz.com/SEC_Focuses_ on_Broker-Dealer_Registration_Issues_Facing_ Private_Fund_Managers/.
www.thehedgefundjournal.com
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