ENROLLED 2016 Legislature CS for CS for SB 286 2016286er 1 2 An act relating to merger and acquisition brokers; 3 amending s. 517.061, F.S.; providing an exemption from 4 certain registration requirements with the Office of 5 Financial Regulation for a specified offer or sale of 6 securities; amending s. 517.12, F.S.; defining terms; 7 requiring a merger and acquisition broker to receive 8 certain written assurances from a specified person 9 prior to the completion of specified securities 10 transactions; providing an exemption from certain 11 registration requirements with the office for a merger 12 and acquisition broker under certain circumstances; 13 specifying disqualifying conditions for the exemption; 14 providing an effective date. 15 16 Be It Enacted by the Legislature of the State of Florida: 17 18 Section 1. Subsection (22) is added to section 517.061, 19 Florida Statutes, to read: 20 517.061 Exempt transactions.—Except as otherwise provided 21 in s. 517.0611 for a transaction listed in subsection (21), the 22 exemption for each transaction listed below is self-executing 23 and does not require any filing with the office before claiming 24 the exemption. Any person who claims entitlement to any of the 25 exemptions bears the burden of proving such entitlement in any 26 proceeding brought under this chapter. The registration 27 provisions of s. 517.07 do not apply to any of the following 28 transactions; however, such transactions are subject to the 29 provisions of ss. 517.301, 517.311, and 517.312: 30 (22) The offer or sale of securities, solely in connection 31 with the transfer of ownership of an eligible privately held 32 company, through a merger and acquisition broker in accordance 33 with s. 517.12(22). 34 Section 2. Subsection (22) is added to section 517.12, 35 Florida Statutes, to read: 36 517.12 Registration of dealers, associated persons, 37 intermediaries, and investment advisers.— 38 (22)(a) As used in this subsection, the term: 39 1. “Broker” has the same meaning as “dealer” as defined in 40 s. 517.021. 41 2. “Control person” means an individual or entity that 42 possesses the power, directly or indirectly, to direct the 43 management or policies of a company through ownership of 44 securities, by contract, or otherwise. A person is presumed to 45 be a control person of a company if, with respect to a 46 particular company, the person: 47 a. Is a director, a general partner, a member, or a manager 48 of a limited liability company, or is an officer who exercises 49 executive responsibility or has a similar status or function; 50 b. Has the power to vote 20 percent or more of a class of 51 voting securities or has the power to sell or direct the sale of 52 20 percent or more of a class of voting securities; or 53 c. In the case of a partnership or limited liability 54 company, may receive upon dissolution, or has contributed, 20 55 percent or more of the capital. 56 3. “Eligible privately held company” means a company that 57 meets all of the following conditions: 58 a. The company does not have any class of securities which 59 is registered, or which is required to be registered, with the 60 United States Securities and Exchange Commission under the 61 Securities Exchange Act of 1934, 15 U.S.C. ss. 78a et seq., or 62 with the office under s. 517.07, or for which the company files, 63 or is required to file, summary and periodic information, 64 documents, and reports under Section 15(d) of the Securities 65 Exchange Act of 1934, 15 U.S.C. s. 78o(d). 66 b. In the fiscal year immediately preceding the fiscal year 67 during which the merger and acquisition broker begins to provide 68 services for the securities transaction, the company, in 69 accordance with its historical financial accounting records, has 70 earnings before interest, taxes, depreciation, and amortization 71 of less than $25 million or has gross revenues of less than $250 72 million. On July 1, 2021, and every 5 years thereafter, each 73 dollar amount in this sub-subparagraph shall be adjusted by 74 dividing the annual value of the Employment Cost Index for wages 75 and salaries for private industry workers, or any successor 76 index, as published by the Bureau of Labor Statistics, for the 77 calendar year preceding the calendar year in which the 78 adjustment is being made, by the annual value of such index or 79 successor index for the calendar year ending December 31, 2012, 80 and multiplying such dollar amount by the quotient obtained. 81 Each dollar amount determined under this sub-subparagraph shall 82 be rounded to the nearest multiple of $100,000. 83 4. “Merger and acquisition broker” means any broker and any 84 person associated with a broker engaged in the business of 85 effecting securities transactions solely in connection with the 86 transfer of ownership of an eligible privately held company, 87 regardless of whether that broker acts on behalf of a seller or 88 buyer, through the purchase, sale, exchange, issuance, 89 repurchase, or redemption of, or a business combination 90 involving, securities or assets of the eligible privately held 91 company. 92 5. “Public shell company” means a company that at the time 93 of a transaction with an eligible privately held company: 94 a. Has any class of securities which is registered, or 95 which is required to be registered, with the United States 96 Securities and Exchange Commission under the Securities Exchange 97 Act of 1934, 15 U.S.C. ss. 78a et seq., or with the office under 98 s. 517.07, or for which the company files, or is required to 99 file, summary and periodic information, documents, and reports 100 under Section 15(d) of the Securities Exchange Act of 1934, 15 101 U.S.C. s. 78o(d); 102 b. Has nominal or no operations; and 103 c. Has nominal assets or no assets, assets consisting 104 solely of cash and cash equivalents, or assets consisting of any 105 amount of cash and cash equivalents and nominal other assets. 106 (b) Prior to the completion of any securities transaction 107 described in s. 517.061(22), a merger and acquisition broker 108 must receive written assurances from the control person with the 109 largest percentage of ownership for both the buyer and seller 110 engaged in the transaction that: 111 1. After the transaction is completed, any person who 112 acquires securities or assets of the eligible privately held 113 company, acting alone or in concert, will be a control person of 114 the eligible privately held company or will be a control person 115 for the business conducted with the assets of the eligible 116 privately held company; and 117 2. If any person is offered securities in exchange for 118 securities or assets of the eligible privately held company, 119 such person will, before becoming legally bound to complete the 120 transaction, receive or be given reasonable access to the most 121 recent year-end financial statements of the issuer of the 122 securities offered in exchange. The most recent year-end 123 financial statements shall be customarily prepared by the 124 issuer’s management in the normal course of operations. If the 125 financial statements of the issuer are audited, reviewed, or 126 compiled, the most recent year-end financial statements must 127 include any related statement by the independent certified 128 public accountant; a balance sheet dated not more than 120 days 129 before the date of the exchange offer; and information 130 pertaining to the management, business, results of operations 131 for the period covered by the foregoing financial statements, 132 and material loss contingencies of the issuer. 133 (c) A merger and acquisition broker engaged in a 134 transaction exempt under s. 517.061(22) is exempt from 135 registration under this section unless the merger and 136 acquisition broker: 137 1. Directly or indirectly, in connection with the transfer 138 of ownership of an eligible privately held company, receives, 139 holds, transmits, or has custody of the funds or securities to 140 be exchanged by the parties to the transaction; 141 2. Engages on behalf of an issuer in a public offering of 142 any class of securities which is registered, or which is 143 required to be registered, with the United States Securities and 144 Exchange Commission under the Securities Exchange Act of 1934, 145 15 U.S.C. ss. 78a et seq., or with the office under s. 517.07; 146 or for which the issuer files, or is required to file, periodic 147 information, documents, and reports under Section 15(d) of the 148 Securities Exchange Act of 1934, 15 U.S.C. s. 78o(d); 149 3. Engages on behalf of any party in a transaction 150 involving a public shell company; 151 4. Is subject to a suspension or revocation of registration 152 under Section 15(b)(4) of the Securities Exchange Act of 1934, 153 15 U.S.C. s. 78o(b)(4); 154 5. Is subject to a statutory disqualification described in 155 Section 3(a)(39) of the Securities Exchange Act of 1934, 15 156 U.S.C. s. 78c(a)(39); 157 6. Is subject to a disqualification under the United States 158 Securities and Exchange Commission Rule 506(d), 17 C.F.R. s. 159 230.506(d); or 160 7. Is subject to a final order described in Section 161 15(b)(4)(H) of the Securities Exchange Act of 1934, 15 U.S.C. s. 162 78o(b)(4)(H). 163 Section 3. This act shall take effect July 1, 2016.