Investment bankers wanted -- no license required

The House of Representatives just unanimously green-lit rules that would allow anyone with a pulse to act as an investment banker -- no
matter how unqualified he or she may be.

The House measure would relax the eligibility requirements for serving as an adviser to a business owner looking to sell his company to -- or
merge it with -- another. Proponents claim that it will create jobs and benefit Main Street businesses.

The opposite is true. Not only could the legislation put Americans out of work. If passed, it would give rise to a new group of financial quacks that could swindle hard-working entrepreneurs out of millions.

The measure -- titled the Small Business Mergers and Acquisitions Simplification Act -- conflates two professions: investment banking
and business brokering. Practically speaking, it would eliminate oversight for advisers serving companies with revenues up to $250
million or pre-tax earnings up to $25 million.

That's akin to saying anyone should be able to practice law, regardless of whether they went to law school or passed the bar exam.

Investment bankers are well-versed in the legal and financial details of transactions of high-value businesses, typically worth more than $10 million. They serve as intermediaries between business owners and potential buyers, performing time-intensive investigative work and
helping bring deals to an equitable close.

Investment bankers usually have a background in banking or private equity, with a degree in business or finance. Often, they also have a
master's or law degree.

Before they can practice, investment bankers must pass a number of exams that test their knowledge of technical issues from taxation to
investment risk to financial regulation. They must also register their companies with the Securities and Exchange Commission (SEC) and the
Financial Industry Regulatory Authority (FINRA), which oversee the industry. By registering, investment bankers agree to operate
transparently and are subject to rules that ensure both buyer and seller are protected when securities instruments are traded.

"Business brokers," on the other hand, are similar to real-estate brokers. They may have a degree or background in business, but it isn't required. And because their deals often don't involve securities, most business brokers are not registered.

Business brokers specialize in assisting the seller of a Main Street company. Marketing is a major portion of their services -- they tend to advertise businesses for sale online or in newspapers and oversee relatively simple transactions.

For instance, the owner of a laundromat may decide that he'd like to retire. Rather than close up shop, he might hire a business broker to sell his firm or merge it with a competitor. By doing so, he can claim a return on the business he may have spent his life building -- and
potentially preserve the jobs of his employees.

Investment bankers, by contrast, shepherd far more complex deals to completion.

Consider a lab working on a targeted cancer treatment that may be looking for a life-sciences firm to acquire it -- and its valuable
intellectual property. The lab could turn to an investment banker who would perform a confidential valuation of the lab and discreetly seek out potential buyers, like private-equity firms or competitors.

Clearly, investment bankers and business brokers are not the same.

Yet the House bill would treat them as such. Rep. Bill Huizenga (R-Mich), a sponsor of the bill, claimed that, "there is no risk to the public" and "no threat to the safety and soundness of our economic system."

This is untrue. The reform would give even those barred or suspended by the SEC the freedom to handle billion-dollar deals. Business-owners
would have to contend with an increased risk of fraud, abuse, or a sale on unfavorable terms.

The stakes are too high to allow financial amateurs to oversee such complicated transactions. Many of the companies with which
broker-dealers work have hundreds or thousands of employees. A poorly structured buy-out of a large regional company, for instance, could
kill a town's workforce.

Worse yet, the measure's sponsors rammed the bill through the House without considering input from experts opposed to it. They even
employed the "suspension of the rules" procedure, in which debate is limited to just 40 minutes.

The Senate Banking Committee may soon consider an identical version of the bill. They must give it proper review and limit its broad scope.
If they don't, this sweeping act of financial deregulation will put businesses -- and jobs -- at risk.

Jordan has been a financial services attorney for over 25 years.

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