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H.R.2274 Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013

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Week Ending January 17, 2014

H.R.2274 Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013

The Securities Exchange Act of 1934 is amended so to allow the merger and acquisition brokers who perform services in connection with the transfer of ownership of smaller, privately-held companies to register with the Securities and Exchange Commission (SEC) by filing electronic notice. SEC is directed to accept such registration as a properly completed notice but the SEC must still approve of the registration if the broker or associate is subject to suspension or revocation of registration, to a statutory disqualification or to a disqualification under SEC rules pursuant to provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The term `eligible privately held company’ means a company that meets both of the following conditions:

`(I) The company does not have any class of securities registered, or required to be registered, with the Commission under section 12 or with respect to which the company files, or is required to file, periodic information, documents, and reports under section 15(d).

`(II) In the fiscal year ending immediately before the fiscal year in which the services of the M&A broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions (determined in accordance with the historical financial accounting records of the company):

`(aa) The earnings of the company before interest, taxes, depreciation, and amortization are less than $ 25,000,000.

`(bb) The gross revenues of the company are less than $ 250,000,000.

`(iii) M&A BROKER- The term `M&A broker’ means a broker engaged in the business of effecting the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company, if the broker reasonably believes that–

`(I) upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert, will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and

`(II) if any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent year-end balance sheet, income statement, statement of changes in financial position, and statement of owner’s equity of the issuer of the securities offered in exchange, and, if the financial statements of the issuer are audited, the related report of the independent auditor, a balance sheet dated not more than 120 days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and material loss contingencies of the issuer.

Sponsor: Rep Huizenga, Bill [MI-2]

VOTES

House on Passage:    On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 422 – 0 (Roll no. 14).

House Amendments:

Motion to recommit:

Text of the motion:   

Senate Amendments:

Final Status:

OTHER BILL DATA

Cost to the taxpayers:   CBO estimates that implementing H.R. 2274 would lead to a minor increase in spending by the Securities and Exchange Commission (SEC) to clarify the applicability of regulations regarding registration requirements for brokers of mergers and acquisitions. The SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net budgetary effect of implementing the bill would be negligible.

Pay-as-you-go requirements:   Pay-as-you-go procedures do not apply to this legislation because it would not affect direct spending or revenues.

Regulatory and other impact:   H.R. 2274 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would not affect the budgets of state, local, or tribal governments.

Earmark Certification:

Duplication of programs:

Budget Authority:  

Constitutional Authority:

H.R. 2274.  Congress has the power to enact this legislation pursuant to the following:

Article I, Section 8, Clauses 1 (“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises,

to pay the Debts and provide for the common Defense and  general Welfare of the United States; but all Duties, Imposts

and Excises shall be uniform throughout the United States”),  3 (“To regulate Commerce with foreign Nations, and among the

several States, and with the Indian Tribes”), and 18 (“To   make all Laws which shall be necessary and proper for

United States, or in any Department or Officer thereof).

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