Series 79 Importance

Why a Series 79 Registered Representative is an Important Protection when Selling Your Business

M&A brokers often facilitate transactions where a companies stock or securities are transferred to a new owner.  As securities transactions they fall under the Securities Exchange Act of 1934.  The Act Series 79requires brokers effecting securities transfer transactions to be registered as brokers under the Act or risk being exposed – along with their clients – to the risk that the transaction could be rescinded.  In other words a buyer with remorse could reverse a deal after the fact if it was facilitated by an un-registered broker.  (Securities transactions can be created not only by the transfer of stock but also at times by the creation of certain seller notes and earn outs.)

Business Brokers and M&A Advisors Avoid Registration

Despite this most M&A advisors and business brokers have avoided registration because of the time, expense and occasional “no-action” letters from the SEC stating they would not pursue them for non-compliance.  Even though the SEC has generally ignored the situation, the activities noted above are still illegal and subject to private legal action as well as action by state securities regulators.  There have been recent cases where deals have been rescinded after lengthy and costly litigation.

SEC Creates the Series 79 Registration

Over the years the M&A and business broker communities lobbied the SEC for a regulatory exemption to eliminate the confusion and liability concerns.  Rather than grant an exemption the SEC created a special category of registration for M&A related activities including: “advising on or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions, including but not limited to rendering a fairness, solvency or similar opinion.”  This is known as the Series 79 Limited Representative – Investment Banking registration.  Despite the creation of the Series 79 the majority of M&A advisors and brokers have opted not to become registered.

BMI’s Position on Licensing

After studying the situation, BMI decided that at a minimum the companies Managing Directors would obtain the Series 79 registration in order to protect our clients in the event a deal became a securities transaction.  Consequently they became registered representatives with Stillpoint Capital LLC.  To ensure compliance with securities regulations all BMI deals are sent to Stillpoint for review.  Based on Stillpoint’s determination the deal is then processed in the appropriate manner.  BMI’s Managing Directors Series 79 registrations and the deal reviews by Stillpoint Capital have zero cost impact and almost no impact at all on our clients.  Protection is provided seamlessly and at no extra cost.


*Some Associates of BMI are registered representatives of, and securities transactions are conducted through, StillPoint Capital, LLC, Member FINRA and SIPC, Tampa, FL.  BMI is not affiliated with StillPoint Capital.

Further Reading

http://newenglandinhouse.com/reprints/2014/04/13/no-action-letter-sec-relief-for-ma-finders/

http://securities-law-blog.com/2015/08/25/finders-facts-related-broker-dealer-registration-requirements/