Although the New Federal Exemption Is Generally Aligned with the SEC’s 2014 No-Action Relief, There Are Some Notable Differences. Moreover, State Law Registration Requirements for M&A Brokers Are Not Preempted.

The U.S. Congress recently enacted a conditional exemption (the “Exemption”) from registration under Section 15(b) of the Securities Exchange Act of 1934 for qualifying brokers that facilitate merger and acquisition (“M&A”) transactions involving certain privately held companies. The Exemption essentially is a codification of relief for certain M&A brokers from the Exchange Act’s broker registration requirements that the staff of the Division of Trading and Markets of the U.S. Securities and Exchange Commission (“SEC”) previously granted in a 2014 no-action letter (“2014 NAL”). However, the Exemption is narrower in that it imposes limitations on the size of the privately held company that is the subject of an M&A transaction. The Exemption became effective on March 29, 2023; that same day, the SEC staff withdrew the 2014 NAL effective immediately.