The exemption pursuant to the M&A Advisors letter applies if the following criteria are satisfied:
- The broker cannot, directly or indirectly through affiliates, provide financing for the transaction.
- The broker cannot have custody or control of, or otherwise handle funds or securities issued in connection with, the transaction.
- The transaction cannot involve a public offering or a shell company, other than a business combination related shell company, a “NewCo”.
- If representing both buyers and sellers, the broker must disclose who it represents and obtain consent to joint representations.
- If the transaction involves a group of buyers, the group must have been formed without the involvement of the broker.
- The buyer or group of buyers must control and actively operate the company or the business conducted with the assets of the business. Control will be presumed if the buyer, or buyer group has the right to vote 25% or more of a class of voting securities, has the power to sell or direct the sale of 25% of more of a class of voting securities, or, in the case of a partnership or limited liability company, has the right to receive upon dissolution or has contributed 25% or more of the capital. •
- The transaction cannot involve transfers of interests to passive buyers.
- Any securities issued in the transaction must be restricted securities under Rule 144(a)(3) of the Securities Act of 1933.
- The broker must not have been barred or suspended from associating with a brokerdealer. •
The broker cannot have the ability to bind a party to the transaction. For more detail please see the SEC No-Action Letter here.