Legal Updates

Breaking News – IBBA and M&A Source Update on Passage of H.R. 686 by House Representatives

Licensing Exemption Bill Updates

We are at the tipping point! Your action is critical right now!


On February 3, 2016, the House of Representatives passed H.R. 686 within H.R. 1675 (Capital Markets Improvement Act of 2016) with an amendment to make H.R. 686 comport with the companion bill in the Senate, S. 1010. The amendment to H.R. 686 added back two important investor protections which NASAA (the North American Securities Administrators Association) strongly advocated.

H.R. 1675 was sent to, and received in the Senate of the United States, February 4, 2016. H.R. 1675 was read twice and referred to the Committee on Banking, Housing and Urban Affairs.

As a business or M&A broker, you will be explicitly exempted from requirements to register under federal securities law, subject to very realistic conditions and imposing nothing new on you that does not already apply today. This requires passing the U. S. House Bill HR686 and the Senate Bill S1010.

Your help is urgently needed!

Your Senators support is critically important for the Senate passing an omnibus bill mirroring the House legislation H.R. 1675, which includes the amended H.R. 686 (now congruent with the Senate bill, S. 1010, the Small Business Merger & Acquisitions Sales and Brokerage bill.

Our challenge now is to continue building support in the Senate for S 1010as meshed into a bill matching H.R. 1675, hopefully before the end of this legislative session.

S.1010 needs co-sponsors and supporters.

Key actions for you to take immediately include:

E-mail Your Senators Now!
Click here for: U.S. Senators of the 114th Congress

Click on the following links to learn more:


You Can Impact Your Future!

HR 686, The Small Business Mergers, Acquisitions, Sales and Brokerage Simplification Act of 2015, (before it was amended February 3, 2016) was identical to an earlier bill (HR 2274), which was introduced in the 113th Congress and UNANIMOUSLY voted out of the House Financial Services Committee, 57-0, and ultimately passed UNANIMOUSLY by the full House, 422-0. We hope for a similar result for S1010, the amended H.R. 686 counterpart in the Senate.

A joint industry coalition of professional associations and professionals, the IBBA and M&A Source, side by side with AM&AA and regional associations, have worked diligently to help create this opportunity for our profession, our customers and clients.

If you are in support of this endeavor, please contact your Senators’ offices immediately by phone and email to ask them to vote to pass S. 1010 or the Senate companion bill to the omnibus bill H.R. 1675 recently passed by the House of Representatives. Please consider calling on your support staff, associated brokers, family or others in your network to do the same.

A Brief History Behind this Bill

As a result of the Great Depression, Congress passed securities laws in 1933 – 1934 establishing the SEC to oversee and regulate the sale of securities. The 1933 and 1934 laws had noble intentions. An exceedingly complex web of laws, regulations, rules, registrations, court cases and interpretations developed over the next eighty years.

It was widely, but not universally, accepted until 1985, that transferring control in an operating business was not transferring a security, under the “Sale of Business Doctrine”. In 1985, this changed with the Supreme Court Landreth Timber vs. Landreth ruling. In essence, the ruling was one of “form trumps substance”, so the transfer of stock was a transfer of a security simply by looking at the definition contained within the Securities Acts. The inveterate Sale of Business Doctrine was decommissioned.

A securities offering requires extensive disclosures and compliances with complex laws. This is necessary and appropriate in large transactions when securities are sold to the public. When a transaction is not large, it will not support compliance with the securities laws.

The current “one size fits all” regulatory/legislative environment puts owners at risk if their transaction morphs from an asset sale into a stock sale. This can occur due to advice of other transaction professionals, e.g. attorney recommendations regarding transferring contracts or accountants restructuring the deal to minimize the tax ramifications of the sale to the owner.

Owners of small to medium sized companies should enjoy quality representation when they are ready to bring the businesses that often comprise the majority of their net worth to market!

The House of Representatives voted and unanimously approved H.R. 2274, January 14, 2014 by a vote of 422 – 0. This same legislation (H.R. 2274) has been reintroduced in the House of Representatives in 2015 as H.R. 686. H.R. 686 has real potential to create an environment encouraging rather than discouraging successful transitioning of ownership for small to mid-market companies, the majority of businesses providing jobs and growth in the U.S.A.

We need your support to turn this potential into reality. You can reach out to your Congressional Representatives, and all the Representatives in your state, to let them know in your own words:

Our current and future clients should be able to realize the value of the companies they have built as they move on to another phase of their lives. Owners encounter and deal with numerous difficulties in the ordinary course of running their businesses.  If they also have to try to bring their company to market without the aid of M&A Brokers, professionals who should comprise an important part of their support team, in an inefficient market, owners are likely to:

  • Lose their focus on operating their business,
  • Fail to meet their customers’ needs triggering declining revenues while pursuing a quality acquirer,
  • Alternatively, focus on operations and profitability while bypassing potential buyers for their company,
  • Come to market without providing the necessary information potential buyers need as a basis for an offer.

The difficulties inherent in the sale process can cause owners simultaneously trying to run and sell their companies to literally close down operations.

Many businesses that cannot successfully transition to new ownership will be forced to close particularly as the baby boomers want to retire.

This constitutes a loss not only for the Owner, but also the loss of jobs for existing employees, diminished availability of goods and services for customers, a negative impact on the local economy, and diminished tax revenues for the community.

Small through mid-size companies constitute the “backbone of our economy.” The vast majority of companies in this country do not generate earnings that will justify the fees necessitated by compliance with Broker Dealer regulations.

Some of the significant progress to date through the efforts of proactive members of a broad industry coalition include:

  • The 2014 SEC M&A Broker No Action Letter,
  • FINRA’s exemption for fee sharing for licensed broker dealers with certain M&A Brokers (which will go into effect mid-August 2015),
  • The recent Broker Exemption – Texas Administrative Code
  • NASAA’s proposed Model Rule for M&A Brokers,
  • The current bill HR 686 which has been introduced in the House of Representatives.

John Johnson wrote in an earlier IBBA & M&A Source Newsletters: “Today there is cause for optimism that one or more improvements may be realized. . . People who have looked closely recognize this is a win, win, win, win, win . . . practical solution to an unfair and impractical “form over substance” conundrum.”

If H.R. 686 is passed in the House, with a companion bill are passed in the Senate, and signed into law, this legislation will provide an exemption from federal securities registration to M&A Brokers who:

  • Do not raise capital, handle the funds or the securities, nor sell stock in public companies,
  • Deal with eligible private companies having from zero to $250 million in revenues, or zero to $25 million in EBITDA, and
  • Follow clearly specified, non-obtrusive, real-world protocols.

As John eloquently summed up earlier, “This common sense cure eliminates many non-productive requirements, threats, costs and burdens imposed under current law on our profession, business owners and buyers. It may be our profession’s only real opportunity to dramatically uplift our working environment while reducing the risks of allegations a business broker needed to be securities licensed as they serve business buyers and sellers. H.R. 2274 (and its successor HR 686) restores the wisdom lost with decommissioning of the Sale of Business Doctrine.

You have a unique opportunity to impact the regulatory and legislative landscape for our industry.   

  • Reach out to your Congressional Representatives and their Legislative Aides or Directors, explaining the regulatory dilemma that exists today, and the viable resolution now at hand.
  • Who do you know, who may be willing to sponsor or support a similar bill in the Senate?
  • Support the effort with contributions and or pledges to defray the ongoing legal expenses incurred to move this effort forward. For more information click here.
  • Stayed tuned for the latest, breaking news on the legislative front.

Your help is essential in order to reach and cross the goal line!

Please contact John Johnson or Linda Purcell to find out how you can help.

Co-Chairs, Strategic Issues Task Force;

John C. JohnsonLinda J. Purcell
[email protected][email protected]
Phone   918-749-6016Phone 847-358-9404

Find a Broker

Search U.S. Brokers or International

Campaign for Clarity  DoNATE HERE