SEC Issues No-Action Letter Exempting M&A Brokers From Broker-Dealer Registration Requirements in Private M&A Transactions
On February 4, 2014, the staff of the Division of Trading and Markets of the Securities and Exchange Commission (the “SEC”) issued a No-Action Letter1 providing that an M&A Broker may engage in certain activities in connection with the purchase or sale of a privately-held company without being registered as a broker-dealer. Significantly, the M&A Broker may be involved in negotiations and receive transaction-based compensation.
This memorandum summarizes the relief granted by the SEC in the No-Action Letter, which reduces the regulatory burden imposed on intermediaries in such transactions.
We note that the No-Action Letter does not directly address the issue of transaction-based fees paid to private equity fund advisers by portfolio companies, which issue may be the subject of future guidance from the SEC.