,,ii #aaeth ,,congress #b;d ,session ,s4 #ceah ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #bg1 #bjah,mr4 ,peters 7for himself and ,mr4 ,kennedy7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to amend the ,securities ,exchange ,act of #aicd to exempt from registration brokers performing services in connection with the transfer of ownership of smaller privately held companies4 #a4 ,short title ,this ,act may be cited as the ,small ,business ,mergers1 ,acquisitions1 ,sales1 and ,brokerage ,simplification ,act of #bjah4 #b4 ,registration exemption for merger and acquisition brokers ,section #ae7;b7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gho7b77 is amended by adding at the end the following3 7#ac7 ,registration exemption for merger and acquisition brokers 7,a7 ,definitions ,in this paragraph3 7i7 ,business combination related shell company ,the term business combination shell company means a shell company that is formed by an entity that is not a shell company solely for the purpose of-- 7,i7 changing the corporate domicile of that entity solely within the ,united ,states2 or 7,,ii7 completing a business combination transaction 7as defined in section #bcj4afe7;f7 of title #ag1 ,code of ,federal ,regulations7 among #a or more entities other than the company itself1 none of which is a shell company4 7ii7 ,control 7,i7 ,in general ,the term control means the power1 directly or indirectly1 to direct the management or policies of a company1 whether through ownership of securities1 by contract1 or otherwise4 7,,ii7 ,presumption ,for the purposes of this clause1 a person shall be presumed to have control under any of the following circumstances3 7aa7 ,the person is a director1 general partner1 member1 or manager of a limited liability company1 or a corporate officer of a corporation or limited liability company1 and exercises executive responsibility 7or has similar status or functions74 7bb7 ,the person has-- 7,,aa7 the right to vote not less than #be percent of a class of voting securities2 or 7,,bb7 the power to sell or direct the sale of not less than #be percent of a class of voting securities4 7cc7 ,in the case of a partnership or a limited liability company1 the person has the right to receive upon dissolution1 or has contributed1 not less than #be percent of the capital4 7iii7 ,eligible privately held company 7,i7 ,in general ,the term eligible privately held company means a privately held company that-- 7aa7 does not have any class of securities registered1 or required to be registered1 with the ,commission under section #ab or with respect to which the company files1 or is required to file1 periodic information1 documents1 and reports under subsection 7d72 and 7bb7 in the fiscal year ending immediately before the fiscal year in which the services of an ,m,a broker are initially engaged with respect to a securities transaction1 the company1 as determined in accordance with the historical financial accounting records of the company-- 7,,aa7 before interest1 taxes1 depreciation1 and amortization1 has earnings in an amount that is less than #be1jjj1jjj2 or 7,,bb7 has gross revenues in an amount that is less than #bej1jjj1jjj4 7,,ii7 ,adjustment of amounts ,in addition to the adjustments required under subparagraph 7,f71 the ,commission may1 by rule1 modify the dollar amounts described in subclause 7,i7 if the ,commission determines that such a modification is necessary or appropriate in the public interest or for the protection of investors4 7iv7 ,m,a broker ,the term ,m,a broker means a broker1 and any person associated with a broker1 that is engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company1 regardless of whether the broker acts on behalf of a seller or buyer1 through the purchase1 sale1 exchange1 issuance1 repurchase1 or redemption of1 or a business combination involving1 securities or assets of the eligible privately held company1 if the broker reasonably believes that-- 7,i7 upon consummation of the transaction1 any person acquiring securities or assets of the eligible privately held company1 acting alone or in concert1 will control and1 directly or indirectly1 will be active in the management of-- 7aa7 the eligible privately held company2 or 7bb7 the business conducted with the assets of the eligible privately held company2 and 7,,ii7 if any person is offered securities in exchange for securities or assets of the eligible privately held company1 that person will1 before becoming legally bound to consummate the transaction1 receive or have reasonable access to-- 7aa7 the most recent fiscal year-end financial statements of the issuer of the securities1 as customarily prepared by the management of the issuer in the normal course of operations2 and 7bb7 if the financial statements of the issuer are audited1 reviewed1 or compiled-- 7,,aa7 any related statement by the independent accountant2 7,,bb7 a balance sheet dated not more than #abj days before the date of the offer2 and 7,,cc7 information pertaining to the issuer's management1 business1 material loss contingencies1 and1 for the period covered by those financial statements1 results of operations4 7v7 ,shell company ,the term shell company means a company that1 at the time of a transaction with an eligible privately held company-- 7,i7 has no or nominal operations2 and 7,,ii7 has-- 7aa7 no or nominal assets2 7bb7 assets consisting solely of cash and cash equivalents2 or 7cc7 assets consisting of any amount of cash and cash equivalents and nominal other assets4 7,b7 ,general exemption ,except as provided in subparagraphs 7,c7 and 7,d71 an ,m,a broker shall be exempt from registration under this section4 7,c7 ,excluded activities ,an ,m,a broker shall not be eligible for an exemption under this paragraph if the ,m,a broker does any of the following3 7i7 ,directly or indirectly1 in connection with the transfer of ownership of an eligible privately held company1 receives1 holds1 transmits1 or has custody of the funds or securities to be exchanged by the parties to the transaction4 7ii7 ,engages on behalf of an issuer in a public offering of any class of securities that is registered1 or is required to be registered1 with the ,commission under section #ab or with respect to which the issuer files1 or is required to file1 periodic information1 documents1 and reports under subsection 7d74 7iii7 ,engages on behalf of any party in a transaction involving a shell company1 other than a business combination related shell company4 7iv7 ,directly1 or indirectly through any affiliate of the ,m,a broker1 provides financing relating to the transfer of ownership of an eligible privately held company4 7v7 ,assists any party in obtaining financing from an unaffiliated third party without-- 7,i7 complying with all other applicable laws in connection with that assistance1 including1 if applicable1 part #bbj of title #ab1 ,code of ,federal ,regulations2 and 7,,ii7 disclosing any compensation in writing to the party4 7vi7 ,represents both the buyer and the seller in the same transaction without-- 7,i7 providing clear written disclosure with respect to the parties the broker represents2 and 7,,ii7 obtaining written consent from both parties to the joint representation4 7vii7 ,facilitates a transaction with a group of buyers formed with the assistance of the ,m,a broker to acquire the eligible privately held company4 7viii7 7,i7 ,engages in a transaction involving the transfer of ownership of an eligible privately held company to a passive buyer or group of passive buyers4 7,,ii7 ,for purposes of subclause 7,i71 a buyer that is actively involved in managing the acquired company described in that subclause may not be construed to be a passive buyer1 without regard to whether that buyer is owned by passive beneficial owners4 7ix7 ,binds a party to a transfer of ownership of an eligible privately held company4 7,d7 ,disqualifications ,an ,m,a broker shall not be eligible for an exemption under this paragraph if the broker is subject to-- 7i7 suspension or revocation of the registration of the broker under paragraph 7#d72 7ii7 a statutory disqualification described in section #c7;a77#ci72 7iii7 a disqualification under the rules adopted by the ,commission under section #ibf of the ,investor ,protection and ,securities ,reform ,act of #bjaj 7#ae ,u4,s4,c4 #gg;d note72 or 7iv7 a final order described in paragraph 7#d77;,h74 7,e7 ,rule of construction ,nothing in this paragraph may be construed to limit any other authority of the ,commission to exempt any person1 or any class of persons1 from any provision of-- 7i7 this title2 or 7ii7 any rule or regulation issued under this title4 7,f7 ,inflation adjustment 7i7 ,in general ,on the date that is #e years after the date of enactment of the ,small ,business ,mergers1 ,acquisitions1 ,sales1 and ,brokerage ,simplification ,act of #bjah1 and every #e years thereafter1 each dollar amount in subparagraph 7,a77iii77,i77bb7 shall be adjusted by-- 7,i7 dividing the annual value of the ,employment ,cost ,index ,for ,wages and ,salaries1 ,private ,industry ,workers 7or any successor index71 as published by the ,bureau of ,labor ,statistics1 for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index 7or successor7 for the calendar year ending ,december #ca1 #bjab2 and 7,,ii7 multiplying that dollar amount by the quotient obtained under subclause 7,i74 7ii7 ,rounding ,each dollar amount determined under clause 7i7 shall be rounded to the nearest multiple of #ajj1jjj4 4 #c4 ,effective date ,this ,act1 and any amendment made by this ,act1 shall take effect on the date that is #ij days after the date of enactment of this ,act4