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Mr. HUIZENGA. Madam Speaker, I rise today in support of my legislation, H.R. 935, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2021.
Madam Speaker, this bill isn't new, we have been here before. In fact, this will be the third instance that my legislation has actually come to the floor. Each time Members of this body have unanimously supported the legislation before us today. I certainly hope that the third time is the charm.
Let's be clear. For small, privately-owned businesses, merger and acquisition advisers and business brokers perform crucial roles in preparing these privately held businesses for a sale or a merger by finding and screening potential business buyers or partners. These brokers play a vital role in navigating M&A transactions to successful outcomes.
Unfortunately, Federal securities regulations technically require an M&A broker to be registered and regulated by the Securities and Exchange Commission, as well as FINRA, just like a Wall Street investment banker selling or buying publicly traded companies. This is a problem long identified by both practitioners and the regulators themselves.
Whether it is a small, locally owned store in Holland, Michigan, my hometown, or a Fortune 500 company, today, the same rules apply, regardless of the size of the business, the size of the transaction, or whether they are publicly or privately held.
Sadly, these last 2 years have only increased the need for my bill. Despite $5 trillion in COVID relief packages, which have often picked winners and losers, rising costs due to inflation are making it difficult for many small businesses to keep the lights on today.
Recent data from the Federal Reserve itself showed that 85 percent of small businesses experienced financial hardships and difficulties in 2021. According to the Small Business Administration, 68 percent of small business owners say they are having a hard time keeping and hiring staff.
Nevertheless, small businesses continue to be the backbone of all of our local economies. Just look at my home State of Michigan, which is the home of very large companies like the automakers, office furniture makers, chemical companies, and medical device companies. But it also is a place where 98 percent of businesses are small businesses--98 percent of them--and they employ literally half of the Michigan workforce. Just as important, for every $100 spent at a local business, roughly $68 stays in the local economy, according to studies.
Small businesses need to grow and have to do a couple of different things to be successful. For some that means they need to consolidate; some may need to restructure and try to recover from the challenges that have been exacerbated by the pandemic or the economy or whatever it might be; and sometimes it may be a family succession plan that is happening within those small businesses. These innovators, entrepreneurs, and risk-takers are critical to our country's economic growth and prosperity. We need to level the playing field that gives an unfair advantage to those Wall Street big guys.
So, how did we get here?
As was discussed, in 2006 merger and acquisition brokers attempted to address their concerns with the Securities and Exchange Commission by developing a rule that would codify and simplify the ``broker-dealer'' regulation.
Unfortunately, due to the fallout from the great financial crisis, the SEC could not make the time for this rulemaking and make it a priority, which sent groups then to Congress for a legislative fix. Along the way, this bill has enjoyed bipartisan and bicameral support. It passed the Committee on Financial Services, not once, not twice, but now four times, including this last summer.
In 2014, the chief counsel of the Division of Trading of the Securities and Exchange Commission released the M&A broker no-action letter, which concluded that the SEC staff would not recommend enforcement against an unregistered person who was engaged in facilitating a securities transaction solely related to the purchase or sale of a privately held company--regardless of the size of the company--provided certain enumerated conditions were met.
H.R. 935 is consistent with the no-action letter but will clarify and simplify the merger process for small businesses and M&A brokers. The bill codifies the extensive investor protections, while not affecting the SEC's jurisdiction over M&A brokers.
However, a no-action letter is not legally binding. It cannot change securities laws. That is up to us, Congress. We must pass my legislation to provide legal clarity once and for all.
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Mr. HUIZENGA. Madam Speaker, we have been on this journey for nearly 10 years, going back to the 113th Congress. While many of the Members who served with me back then no longer remain, the challenges small businesses face have not dimmed.
Madam Speaker, I recognize my colleague, Representative Brian Higgins from New York, who has been the original cosponsor from day one, and he has been on this journey every step of the way, as well as Congresswoman Maloney and Chairwoman Waters and Ranking Member McHenry.
Madam Speaker, I urge my colleagues to pass this commonsense bipartisan legislation.
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