NASAA Considering Exempting Certain M&A Brokers from State Registration (with Lofchie Comment)

The Broker-Dealer Section of the North American Securities Administrators Association ("NASAA") requested comment for a proposed uniform state model rule that would provide an exemption of certain "merger and acquisition brokers" from registration as "brokers," "dealers," "agents," and/or "broker-dealers" pursuant to state securities laws. The exemption would be largely modeled after an SEC no-action letter dated February 4, 2014.

Comments on the proposal are due by February 16, 2015.

Lofchie Comment: As to the substance of the proposed exemption, the SEC no-action letter on which it is modeled is fairly complicated in its terms. For deals over a very small size, it can be difficult to be certain that the final terms of the deal will adhere to the requirements of the no-action letter. Accordingly, it would be worthwhile to consider an exemption with fewer conditions, perhaps an alternative that could be used for small deals.The SEC's 2014 no-action letter is an instance of a regulatory agency willingly ceding authority over a class of potentially regulated entities (small business brokers) that it really did not have the resources to oversee. This is contrary to the trend of other federal agencies asserting their authority to the maximum possible extent without any regard to their actual resources or the public policy consequences. Perhaps the state regulators will follow the SEC example. Such a decision will be left to each of the fifty states.

See: Background and Proposed NASAA Model Rule Exempting Certain Merger and Acquisition Brokers from State Registration; NASAA Press Release.