Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2021

Madam Speaker, I rise today in support of my legislation,

H.R. 935, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2021.

Madam Speaker, this bill isn't new, we have been here before. In fact, this will be the third instance that my legislation has actually come to the floor. Each time Members of this body have unanimously supported the legislation before us today. I certainly hope that the third time is the charm.

Let's be clear. For small, privately-owned businesses, merger and acquisition advisers and business brokers perform crucial roles in preparing these privately held businesses for a sale or a merger by finding and screening potential business buyers or partners. These brokers play a vital role in navigating M&A transactions to successful outcomes.

Unfortunately, Federal securities regulations technically require an M&A broker to be registered and regulated by the Securities and Exchange Commission, as well as FINRA, just like a Wall Street investment banker selling or buying publicly traded companies. This is a problem long identified by both practitioners and the regulators themselves.

Whether it is a small, locally owned store in Holland, Michigan, my hometown, or a Fortune 500 company, today, the same rules apply, regardless of the size of the business, the size of the transaction, or whether they are publicly or privately held.

Sadly, these last 2 years have only increased the need for my bill. Despite $5 trillion in COVID relief packages, which have often picked winners and losers, rising costs due to inflation are making it difficult for many small businesses to keep the lights on today.

Recent data from the Federal Reserve itself showed that 85 percent of small businesses experienced financial hardships and difficulties in 2021. According to the Small Business Administration, 68 percent of small business owners say they are having a hard time keeping and hiring staff.

Nevertheless, small businesses continue to be the backbone of all of our local economies. Just look at my home State of Michigan, which is the home of very large companies like the automakers, office furniture makers, chemical companies, and medical device companies. But it also is a place where 98 percent of businesses are small businesses--98 percent of them--and they employ literally half of the Michigan workforce. Just as important, for every $100 spent at a local business, roughly $68 stays in the local economy, according to studies.

Small businesses need to grow and have to do a couple of different things to be successful. For some that means they need to consolidate; some may need to restructure and try to recover from the challenges that have been exacerbated by the pandemic or the economy or whatever it might be; and sometimes it may be a family succession plan that is happening within those small businesses. These innovators, entrepreneurs, and risk-takers are critical to our country's economic growth and prosperity. We need to level the playing field that gives an unfair advantage to those Wall Street big guys.

So, how did we get here?

As was discussed, in 2006 merger and acquisition brokers attempted to address their concerns with the Securities and Exchange Commission by developing a rule that would codify and simplify the ``broker-dealer'' regulation.

Unfortunately, due to the fallout from the great financial crisis, the SEC could not make the time for this rulemaking and make it a priority, which sent groups then to Congress for a legislative fix. Along the way, this bill has enjoyed bipartisan and bicameral support. It passed the Committee on Financial Services, not once, not twice, but now four times, including this last summer.

In 2014, the chief counsel of the Division of Trading of the Securities and Exchange Commission released the M&A broker no-action letter, which concluded that the SEC staff would not recommend enforcement against an unregistered person who was engaged in facilitating a securities transaction solely related to the purchase or sale of a privately held company--regardless of the size of the company--provided certain enumerated conditions were met.

H.R. 935 is consistent with the no-action letter but will clarify and simplify the merger process for small businesses and M&A brokers. The bill codifies the extensive investor protections, while not affecting the SEC's jurisdiction over M&A brokers.

However, a no-action letter is not legally binding. It cannot change securities laws. That is up to us, Congress. We must pass my legislation to provide legal clarity once and for all.

Madam Speaker, we have been on this journey for nearly 10 years, going back to the 113th Congress. While many of the Members who served with me back then no longer remain, the challenges small businesses face have not dimmed.

Madam Speaker, I recognize my colleague, Representative Brian Higgins from New York, who has been the original cosponsor from day one, and he has been on this journey every step of the way, as well as Congresswoman Maloney and Chairwoman Waters and Ranking Member McHenry.

Madam Speaker, I urge my colleagues to pass this commonsense bipartisan legislation.

Madam Speaker, I move to suspend the rules and pass the bill (H.R. 935) to amend the Securities Exchange Act of 1934 to exempt from registration brokers performing services in connection with the transfer of ownership of smaller privately held companies, as amended.

Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to include extraneous material thereon.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I rise today to urge passage of H.R. 935, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2021. I thank its lead sponsors, Congressman Huizenga, who serves as the ranking member of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, as well as Congresswoman Maloney who served as the chairwoman of the same subcommittee last Congress.

Congressman Huizenga and Congresswoman Maloney have come together to put forth a commonsense bill, which provides relief for small and midsize businesses who are looking to merge or sell their companies.

Generally, mergers and acquisitions brokers act as intermediaries who conduct negotiated sales of privately held small- and medium-sized companies. These so-called M&A brokers essentially help facilitate the transfer of ownership and control of such companies to a buyer.

The Securities and Exchange Commission, which oversees brokers, can become involved in these transactions because M&A brokers facilitate securities transactions when they connect a selling company to a buyer.

In 2014, the SEC, via a no-action letter, permitted M&A brokers to effect securities transactions with the transfer of ownership of privately held companies without registering as a broker-dealer. This no-action letter helps to account for the fact that small and midsize businesses have fewer resources to pay for the services of registered broker-dealers, and ultimately do not pose the kinds of potentially systemic risks that larger companies may pose.

H.R. 935 would codify the SEC 2014 no-action letter and will further clarify and simplify the registration regime for M&A brokers, which will reduce costs for buyers and sellers.

H.R. 935 is consistent with the North American Securities Administrators Association's model State regulation for M&A brokers, which exempts M&A brokers from State securities legislation.

Madam Speaker, I again thank Members on both sides for coming together on this bill, and I urge its passage, and I reserve the balance of my time.

Madam Speaker, I have no further speakers and I am prepared to close.

Madam Speaker, I reserve the balance of my time until Mr. Hill yields back.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I yield myself the balance of my time.

Madam Speaker, I certainly hope the third time is the charm, as the sponsor of the bill has reiterated. H.R. 935 will provide legal certainty to certain financial intermediaries who serve and support small business owners and buyers.

The bill would codify a longstanding no-action letter by the Securities and Exchange Commission. I thank its sponsors, Mr. Huizenga and Mrs. Maloney.

Madam Speaker, I urge the speedy passage by the House, and I yield back the balance of my time.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I rise today on behalf of the committee in support of H.R. 935, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act. I particularly want to thank the bill's sponsor, the gentleman from Michigan (Mr. Huizenga), for his leadership on this issue on behalf of small businesses across our country. The importance of small businesses to our economy, our job creation, and the innovation across our Nation cannot be overstated. They are the backbone of all of our communities.

In October 2020, the SBA, the Small Business Administration, reported that there were 31.7 million small businesses in the United States. Yet, too often Democrats' heavy-handed approach to business regulation in this country can put that success at risk. A one-size-fits-all regulatory approach disproportionately burdens small enterprises. For those looking to grow through merger and acquisition, they often face additional costs, the expense of that transaction.

The committee has found that merger and acquisition brokers provide crucial services to small businesses whose owners desire to sell the business or merge with another firm. However, certain of these brokers face significant compliance costs, including SEC registration fees, which, of course, are passed on to their clients, the small businesses.

H.R. 935 helps to alleviate these costs by amending the Exchange Act to create a simplified registration system for these kinds of merger and acquisition brokers.

The Securities and Exchange Commission, the SEC, agrees with the premise of this bill. In fact, back in 2014, the SEC issued a no-action letter to exempt certain M&A brokers from registration, and that no- action letter, Madam Speaker, is relied upon today.

Without a change in law, the regulated community is left in a state of uncertainty when it comes to Federal securities laws. The gentleman from Michigan's bill will clarify, simplify, and provide much-needed certainty as to that process without compromising important investor protections.

I also remind my colleagues that this bill has passed the House in previous Congresses. Therefore, our committee urges our colleagues to support H.R. 935, and I reserve the balance of my time.

Madam Speaker, I yield 5 minutes to the gentleman from Michigan (Mr. Huizenga), the author of this legislation and the ranking member of our Investor Protection, Entrepreneurship, and Capital Markets Subcommittee.

Madam Speaker, I yield an additional 30 seconds to the gentleman.

Madam Speaker, let me conclude the discussion on H.R. 935 by thanking my friend from Michigan for his persistent leadership over many Congresses on this topic. I urge my colleagues to support him in this effort, putting it over the goal line, and getting a great result out of the Senate in the days ahead.

Madam Speaker, I urge a ``yes'' vote, and I yield back the balance of my time.

Madam Speaker, I was not present for the following Roll Call votes. Had I been present, I would have voted as follows:

Roll Call No. 152, On Motion to Suspend the Rules and Pass bill (S.66) South Florida Clean Coastal Waters Act, I would have voted YEA;

Roll Call No. 153, On Motion to Suspend the Rules and Pass, as Amended bill (H.R. 7077) Empowering the U.S. Fire Administration Act, I would have voted YES;

Roll Call No. 154, On Motion to Suspend the Rules and Pass, as Amended bill (H.R. 1437) PRECIP Act, I would have voted YES;

Roll Call No. 155, On Motion to Suspend the Rules and Pass bill (S.1872) United States Army Rangers Veterans of World War II Congressional Gold Medal Act, I would have voted YEA;

Roll Call No. 156, On Motion to Suspend the Rules and Pass, as Amended bill (H.R. 5911) Fair Hiring in Banking Act, I would have voted

Madam Speaker, on that I demand the yeas and nays.