M&A Broker Exemption Goes Into Effect

The Consolidated Appropriations Act, 2023, which was signed into law by President Biden in December, contains a provision exempting "M&A brokers" from having to register as broker-dealers with the U.S Securities and Exchange Commission (SEC) for transactions involving eligible privately held companies. The new exemption, codified as new Section 15(b)(13) of the Securities Exchange Act of 1934 (Exchange Act), went into effect March 29, 2023.

The exemption provides that "M&A brokers" involved in the sale of an "eligible privately held company" may receive a commission for their services without having to register as a broker-dealer with the SEC. Previously, many M&A brokers did not register as a broker-dealer based on a January 31, 2014 SEC no-action letter, which stated the SEC would not recommend enforcement against unregistered M&A brokers if their M&A activities satisfied certain conditions.