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Waters Floor Statement on the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act

Washington, DC, December 7, 2017

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the House Committee on Financial Services, gave the following floor statement on H.R. 477, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017:

H.R. 477 seeks to provide a statutory exemption from registration with the Securities and Exchange Commission, or S.E.C., for certain brokers who facilitate the merger or acquisition of small businesses, known as M&A brokers.

When Congress first considered this exemption in a similar bill during the 113th Congress, our goal was to prompt the SEC to provide regulatory relief for these brokers from ill-fitting restrictions designed for persons helping companies raise capital, rather than facilitating their transfer of ownership.

We succeeded.

Two weeks after the House passed that bill, the SEC issued a no-action letter, which contained staffs’ view that if an M&A broker complied with the terms and conditions of the letter, it would recommend that the SEC not take enforcement action against that broker for failing to register with the Commission.

Specifically, the no-action letter required the M&A broker to abide by certain common-sense restrictions to prevent such an exemption from being misused to raise capital or abused by bad actors.

According to the bill’s proponents, H.R. 477 is still necessary to provide legal certainty since the no-action letter is merely the non-binding opinion of SEC staff.

I understand that concern. However, the bill inexplicably omits several of the conditions contained in the no-action letter that protect small businesses and their investors.

I am pleased that this Congress, Representatives Sherman and Huizenga have worked on a bipartisan basis to add these protections back in through an amendment.

If so amended, I will support H.R. 477, which would strike the right balance between regulatory relief and the protection of small companies and their investors.

In particular the amended bill would:

  • Require an M&A broker that represents both the seller and buyer to provide them with clear written disclosures and obtain their consent to that conflict of interest;
  • Prohibit M&A brokers from misusing the exemption to raise capital, rather than transfer ownership of small businesses;
  • Prohibit shell companies from using the exemption as a back-door way to take a small business public; and
  • Prohibit fraudsters and other bad actors from using the exemption.

In addition, the bill would not change the statutory definition of broker, thereby preserving the SEC’s ability to investigate and bring enforcement actions for violations of the antifraud provisions in the securities laws.

The bill also would limit the relief to mergers and acquisitions involving companies with less than $250 million in annual gross revenues, which is the total income of the company, or $25 million in annual earnings, which is the amount of income minus expenses. The amendment would then provide the SEC with the authority to modify these thresholds as necessary or appropriate in the public interest or for the protection of investors

As our nation’s baby boomers head into retirement and look to sell their privately owned businesses to a new generation of entrepreneurs, it is important that they are able to do so in an efficient and cost-effective manner.

If amended, H.R. 477 would allow them to do just that and so I would support the bill.

With that, I’d like to thank my colleagues. I’d like to thank Mr. Hensarling. I’d like to thank Mr. Sherman. This is an important bill for all of us; we are all so supportive of our small businesses. We want them to do well and we do not want them to be hindered by unnecessary regulations. So, with that I yield back the balance of my time.


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