Has Congress lost the ability or the will to pass a unanimous bipartisan small business bill?
© Greg Nash

In the first quarter of 2019, Congress has passed little legislation - few bills affecting small business.  Investigations, impeachment, and politically motivated bills have been the agenda.

The small business community has issued a challenge:  Can this Congress finally pass an overwhelmingly bipartisan small business bill?

In the 115th Congress, the U.S. House of Representatives unanimously passed HR 477, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act with a 426 – 0 recorded vote; but it failed to become law because time ran out in the U.S. Senate at the end of 2018.

HR 477 was publicly praised for its bipartisanship by the chairman and ranking member of the House Committee on Financial Services, Jeb HensarlingThomas (Jeb) Jeb HensarlingHas Congress lost the ability or the will to pass a unanimous bipartisan small business bill? Maxine Waters is the Wall Street sheriff the people deserve Ex-GOP congressman heads to investment bank MORE and Maxine WatersMaxine Moore WatersNadler asks other House chairs to provide records that would help panel in making impeachment decision Bank watchdogs approve rule to loosen ban on risky Wall Street trades F-bombs away: Why lawmakers are cursing now more than ever MORE, respectively - opposite sides of the political spectrum coming together in a true bipartisan manner to pass this critical small business bill. Speaking on the House floor, Hensarling and Waters both emphasized the importance of HR 477 to small businesses and extoled it as a quintessential example of bipartisan collaboration.

Later in the session, Hensarling and Waters - again in bipartisan fashion - added HR 477 to the JOBS and Investor Confidence Act of 2018 (JOBS Act 3.0), passing the U.S. House 406-4. Sens. Gary PetersGary Charles PetersFBI Agents Association calls on Congress to make 'domestic terrorism' a federal crime Senators renew request for domestic threats documents from FBI, DOJ after shootings Overnight Defense: Dems talk Afghanistan, nukes at Detroit debate | Senate panel advances Hyten nomination | Iranian foreign minister hit with sanctions | Senate confirms UN ambassador MORE (D-Mich.) and John KennedyJohn Neely KennedyMORE (R-La.) introduced the companion bill to HR 477 in the Senate. The 115th Congress adjourned before the Senate could act on either bill.

HR 477 would codify into law the no-action letter issued in 2014 by the Securities and Exchange Commission (SEC) staff. No-action letters are not legally binding, even on the Commission; hence the need for legislation. Outside groups supporting HR 477 have been broad, active, and span the political spectrum:

 

  • North American Securities Administrators Association (NASAA);
  • S. Chamber of Commerce;
  • The major national M&A professional associations and foundations;
  • Fifteen state and regional M&A professional associations.

 

Here’s the challenge 

 

On Jan. 16, 2019, Reps. Bill Huizenga (R-Mich.), Brian HigginsBrian HigginsHere are the 95 Democrats who voted to support impeachment On The Money: Sanders unveils plan to wipe .6T in student debt | How Sanders plan plays in rivalry with Warren | Treasury watchdog to probe delay of Harriet Tubman bills | Trump says Fed 'blew it' on rate decision Democrats give Trump trade chief high marks MORE (D-N.Y.), and Bill PoseyWilliam (Bill) Joseph PoseyConservatives ask Barr to lay out Trump's rationale for census question Biz groups target Florida voters ahead of Democratic debates in Miami Hillicon Valley: Democratic state AGs sue to block T-Mobile-Sprint merger | House kicks off tech antitrust probe | Maine law shakes up privacy debate | Senators ask McConnell to bring net neutrality to a vote MORE (R-Fla.) re-introduced the unanimously bipartisan Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act - now designated HR 609 for the 116th Congress.  It is comma for comma the same bipartisan bill as HR 477.

Historically, when the Senate received unanimously passed bills from the House, the Senate majority leader would frequently bypass assigning it to a Senate committee and put it directly on the Senate floor for passage by voice vote; assuming it wasn’t a contentious issue.

But today, even unanimous bipartisan bills like HR 477/HR 609 are subject to filibusters, duplicate committee hearings, and partisan politics.

Let’s see if the Senate and House can take up this challenge and get this small, yet important, bipartisan pro-business bill to the president’s desk this year.

HR 609 

HR 609 would exempt merger and acquisition (M&A) advisors, intermediaries, and business brokers from federal registration as a “broker-dealer” when brokering the purchase or sale of privately-owned companies. This would make these professional services more widely and cost-effectively available to private business owners.

Under today’s “one-size-fits-all” regulatory regime, if sellers or buyers seek advice and assistance with a stock or equity purchase/sale or merger, rather than an asset sale, only an SEC-registered, FINRA member, “Wall Street-type” investment banker can legally broker the transaction.

HR 609 creates a federal ‘broker’ registration exemption only - all anti-fraud and other investor protections continue to apply. The bill adds protections not contained in the SEC’s no-action letter including size caps the SEC is authorized to amend. Importantly, “bad actors” are disqualified from relying upon this exemption and it does not allow transactions involving “public shell” companies.  The bill prohibits M&A brokers from raising capital, holding funds or securities, or financing transactions, so private equity and other investor groups cannot rely on it.

Significantly, NASAA (state securities regulators) adopted a “Model M&A Broker Rule” drawn from prior iterations of this bill to harmonize federal and state securities laws regulating M&A brokers. To date, Alaska, Colorado, Florida, Georgia, Illinois, Iowa, Maryland, Michigan, Mississippi, Missouri, Pennsylvania, South Carolina, South Dakota, Texas, Utah, and Vermont have all granted exemptive relief based on the NASAA model rule and/or the SEC M&A Broker no-action letter, and other states are actively considering similar action.

Let’s get it across the finish line this year!

Small business owners and M&A brokers deserve a clear statement of what federal law requires. HR 609 does just that.

HR 609 has become a litmus test to see if this Congress can pass a truly bipartisan, pro-small business bill.

When Maxine Waters, Jeb Hensarling, and the entire U.S. House of Representatives can agree that this is an excellent bill, then it’s time for the U.S. Senate to get it enacted this year!

John Zayac is President of the Atlanta, Georgia-based, 501(c)(6) Business Intermediary Education Foundation (BIEF), representing business brokers, intermediaries, and M&A advisors. www.biefoundation.org