Finance 20/20

Division of Trading and Markets

No-Action Letter Provides Relief to M&A Brokers

Editorial BoardPosted on February 13, 2014

On January 31, in a significant no-action letter (Letter), the Staff of the Division of Trading and Markets provided assurances that it would not recommend enforcement action to the Commission under Section 15(a) of the Securities Exchange Act of 1934 if an “M&A Broker” (as defined in the Letter) were to engage in enumerated activities in connection with the purchase or sale of a privately-held company without registering as a broker-dealer pursuant to Section 15(b) of the Exchange Act.

The Letter is the culmination of years of effort (both political and regulatory) and provides significant relief to a broad range of activities heretofore restricted to registered broker-dealers. Letter.

SEC No-Action Relief Under the JOBS Act

Editorial BoardPosted on April 8, 2013

On March 26, the Staff of the Division of Trading and Markets of the SEC provided no-action letter relief from the broker-dealer registration requirements of the Securities Exchange Act of 1934 to FundersClub Inc. and its wholly-owned subsidiary in connection with their internet based, Rule 506 compliant securities offerings. FundersClub and its subsidiary are venture capital fund advisers under Rule 203(l)-(1) of the Investment Advisers Act of 1940. The FundersClub no action relief sets forth the Staff’s interpretation of Section 201 of the JOBS Act, which provides an exemption from broker-dealer registration for persons providing certain services in connection with an offering under Rule 506 of Regulation D. In granting the requested relief, subject to numerous conditions, the Staff noted that FundersClub and its subsidiary comply with the JOBS Act, in part, because they and each person associated with them receive no compensation (or the promise of future compensation) in connection with the purchase or sale of securities (transaction-based compensation), rather they receive compensation for their traditional advisory and consulting services, i.e., carried interest. SEC No Action Letter.