Florida Senate - 2016 SB 286 By Senator Brandes 22-00001A-16 2016286__ 1 A bill to be entitled 2 An act relating to mergers and acquisitions brokers; 3 amending s. 517.061, F.S.; providing an exemption from 4 specified registration requirements for a specified 5 offer or sale of securities; amending s. 517.12, F.S.; 6 defining terms; providing that a mergers and 7 acquisitions broker is exempt from registration with 8 the Office of Financial Regulation of the Financial 9 Services Commission; providing exceptions to the 10 exemption; providing an effective date. 11 12 Be It Enacted by the Legislature of the State of Florida: 13 14 Section 1. Subsection (22) is added to section 517.061, 15 Florida Statutes, to read: 16 517.061 Exempt transactions.—Except as otherwise provided 17 in s. 517.0611 for a transaction listed in subsection (21), the 18 exemption for each transaction listed below is self-executing 19 and does not require any filing with the office before claiming 20 the exemption. Any person who claims entitlement to any of the 21 exemptions bears the burden of proving such entitlement in any 22 proceeding brought under this chapter. The registration 23 provisions of s. 517.07 do not apply to any of the following 24 transactions; however, such transactions are subject to the 25 provisions of ss. 517.301, 517.311, and 517.312: 26 (22) The offer or sale of securities of an eligible 27 privately held company, as defined in s. 517.12(22)(a), through 28 a dealer registered under s. 517.12 or through a mergers and 29 acquisitions broker, as defined in s. 517.12(22)(a), if the 30 mergers and acquisitions broker is exempt from registration as a 31 dealer under s. 517.12(22). 32 Section 2. Subsection (22) is added to section 517.12, 33 Florida Statutes, to read: 34 517.12 Registration of dealers, associated persons, 35 intermediaries, and investment advisers.— 36 (22)(a) As used in this subsection, the term: 37 1. “Control person” means an individual, a partnership, a 38 trust, or other organization that possesses the power, directly 39 or indirectly, to direct the management or policies of a company 40 through ownership of securities, by contract, or otherwise. A 41 person is presumed to control a company if, with respect to a 42 particular company, such person: 43 a. Is a director, a general partner, a member, or a manager 44 of a limited liability company, or is an officer who exercises 45 executive responsibility; 46 b. Has the power to vote at least 20 percent of a class of 47 voting securities or has the power to sell or direct the sale of 48 at least 20 percent of a class of voting securities; or 49 c. In the case of a partnership or limited liability 50 company, may receive upon dissolution, or has contributed, at 51 least 20 percent of the capital. 52 2. “Eligible privately held company” means a privately held 53 company that is a going concern and meets all of the following 54 conditions: 55 a. The company does not have any class of securities which 56 is registered, or which is required to be registered, with the 57 Securities and Exchange Commission under the Securities Exchange 58 Act of 1934, 15 U.S.C. s. 78l, or for which the company files, 59 or is required to file, summary and periodic information, 60 documents, and reports under the Securities Exchange Act of 61 1934, 15 U.S.C. s. 78o(d). 62 b. In the fiscal year immediately preceding the fiscal year 63 during which the mergers and acquisitions broker begins to 64 provide services for the securities transaction, the company, in 65 accordance with its historical financial accounting records, has 66 earnings before interest, taxes, depreciation, and amortization 67 of less than $25 million or has gross revenues of less than $250 68 million. On July 1, 2016, and every 5 years thereafter, each 69 dollar amount in this sub-subparagraph shall be adjusted by 70 dividing the annual value of the Employment Cost Index for wages 71 and salaries for private industry workers, or any successor 72 index, as published by the Bureau of Labor Statistics, for the 73 calendar year preceding the calendar year in which the 74 adjustment is being made, by the annual value of such index or 75 successor index for the calendar year ending December 31, 2012, 76 and multiplying such dollar amount by the quotient obtained. 77 Each dollar amount determined under this sub-subparagraph shall 78 be rounded to the nearest multiple of $100,000. 79 80 The term includes a company in bankruptcy proceedings which 81 solicits, engages in research and development activities, or 82 carries out business transactions. 83 3. “Mergers and acquisitions broker” means a person that 84 acts, directly or indirectly, as a broker in carrying out 85 securities transactions solely in connection with the transfer 86 of ownership of eligible privately held companies. A mergers and 87 acquisitions broker may act on behalf of a seller or buyer 88 through the purchase, sale, exchange, issuance, repurchase, or 89 redemption of securities or assets of the eligible privately 90 held company. The broker must reasonably believe that: 91 a. After the transaction is completed, any person who 92 acquires securities or assets of the eligible privately held 93 company, acting alone or in concert, will be the control person 94 of the eligible privately held company or will be the control 95 person for the business conducted with the assets of the 96 eligible privately held company; and 97 b. If any person is offered securities in exchange for 98 securities or assets of the eligible privately held company, 99 such person will, before becoming legally bound to complete the 100 transaction, receive or be given reasonable access to the most 101 recent year-end financial statements of the issuer of the 102 securities offered in exchange. The most recent year-end 103 financial statements shall be customarily prepared by the 104 issuer’s management in the normal course of operations. If the 105 financial statements of the issuer are audited, reviewed, or 106 compiled, the most recent year-end financial statements must 107 include any related statement by the independent accountant; a 108 balance sheet dated not more than 120 days before the date of 109 the offer; and information pertaining to the management, 110 business, results of operations for the period covered by the 111 foregoing financial statements, and material loss contingencies 112 of the issuer. 113 4. “Public shell company” means a company, in concert with 114 an eligible privately held company and at the time of a 115 transaction, which: 116 a. Has any class of securities which is registered, or 117 which is required to be registered, with the Securities and 118 Exchange Commission under the Securities Exchange Act of 1934, 119 15 U.S.C. s. 78l, or for which the company files, or is required 120 to file, summary and periodic information, documents, and 121 reports under the Securities Exchange Act of 1934, 15 U.S.C. s. 122 78o(d); 123 b. Does not have any operations or has only nominal 124 operations; and 125 c. Does not have any assets; or has only nominal assets, 126 assets consisting only of cash, or assets consisting of cash 127 equivalents. 128 (b) A mergers and acquisitions broker is exempt from 129 registration under this section unless the mergers and 130 acquisitions broker: 131 1. Directly or indirectly, in connection with the transfer 132 of ownership of an eligible privately held company, receives, 133 holds, transmits, or has custody of the funds or securities to 134 be exchanged by the parties to the transaction; 135 2. Engages on behalf of an issuer in a public offering of 136 any class of securities which is registered, or which is 137 required to be registered, with the Securities and Exchange 138 Commission under the Securities Exchange Act of 1934, 15 U.S.C. 139 s. 78l; 140 3. Engages on behalf of an issuer in a public offering of 141 any class of securities for which the issuer files, or is 142 required to file, summary and periodic information, documents, 143 and reports under the Securities Exchange Act of 1934, 15 U.S.C. 144 s. 78o(d); 145 4. Engages on behalf of any party in a transaction 146 involving a public shell company; 147 5. Is subject to a suspension or revocation of registration 148 under the Securities Exchange Act of 1934, 15 U.S.C. s. 149 78o(b)(4); 150 6. Is subject to a statutory disqualification described in 151 the Securities Exchange Act of 1934, 15 U.S.C. s. 78c(a)(39); 152 7. Is subject to a disqualification under the rules adopted 153 by the Securities and Exchange Commission under s. 926 of the 154 Investor Protection and Securities Reform Act of 2010, Pub. L. 155 No. 111-203; or 156 8. Is subject to a final order described in the Securities 157 Exchange Act of 1934, 15 U.S.C. s. 78o(b)(4)(H). 158 Section 3. This act shall take effect July 1, 2016.