Do All M&A Firms Need FINRA/SEC Licensing?
If you're preparing to sell your business, one of the most overlooked—but important—questions is:
Does your M&A advisor need to be licensed with FINRA or the SEC?
The short answer: not necessarily.
Many experienced M&A professionals operate legally without being FINRA-registered broker-dealers, thanks to a long-standing regulatory carve-out. Understanding this difference is crucial to choosing the right advisor and staying compliant.
The 2014 SEC No-Action Letter: A Turning Point
In January 2014, the SEC issued a landmark No-Action Letter (NAL) clarifying that certain M&A brokers could facilitate private company sales without registering as broker-dealers, provided they met specific conditions. This gave legal clarity to M&A professionals working on lower middle-market deals—typically those under $100 million.
The NAL allowed M&A brokers to operate outside traditional securities broker-dealer requirements, so long as:
The buyer intends to actively operate the acquired company post-transaction
The target is a privately held company
The M&A broker does not provide financing or hold funds/securities
The deal does not involve a public offering
Both parties receive disclosures about compensation and conflicts of interest
There is no shell company involved on either side
This policy became widely adopted across the M&A industry, especially for private companies and asset-heavy transactions in Arizona, Texas, and across the U.S.
Codification in 2023: The M&A Broker Exemption Becomes Law
In 2023, the Consolidated Appropriations Act of 2023 codified this exemption into federal law via Section 15(b)(13) of the Securities Exchange Act of 1934. This law, known informally as the M&A Broker Exemption, permanently legalized the 2014 No-Action Letter’s terms—with some added clarity and formality.
Here are the main eligibility requirements under the codified exemption:
Private Company Only: The business being sold must not have any class of securities registered with the SEC.
Active Buyer Requirement: The buyer must control and actively manage the business post-close (i.e., no passive investors or shell entities).
Transaction Size Limit: The company must have EBITDA under $25 million or gross revenues under $250 million.
No Capital Raising or Shell Activity: Brokers cannot raise funds, create blind pools, or facilitate shell transactions.
No Custody of Funds or Securities: The M&A broker must never handle client funds or securities.
Why This Matters for Business Owners
This exemption matters for sellers because:
It allows experienced M&A professionals to legally guide deals without full SEC/FINRA compliance burdens
It keeps advisory fees lower and processes more flexible, especially in private sales
It supports a growing number of M&A advisors focused on small to mid-sized businesses
So if you're a business owner in Scottsdale, Phoenix, or Tucson, you can legally work with a non-registered M&A broker—as long as your deal qualifies under the exemption criteria.
When FINRA Licensing Is Required
If your deal involves:
Selling public company stock
Capital raises, especially with multiple investors
Institutional participation or securities issuance
Regulated industries (like financial services)
Then you’ll need to work with a FINRA-licensed broker-dealer.
Final Takeaway
Not all M&A firms need FINRA or SEC licensing—and many top-tier advisors operate legally and effectively under the M&A Broker Exemption. But sellers must ensure their transaction fits the criteria and that their advisor is upfront about how the deal is structured.
Choosing an advisor who understands both the regulatory framework and real-world deal mechanics is the best way to protect yourself—and maximize your exit.
At William & Wall, we understand that the regulatory landscape can be complex—but navigating it shouldn’t slow your momentum. Whether you're a founder exploring a potential exit, or a strategic buyer evaluating M&A opportunities, our team brings clarity, integrity, and deep market expertise to every step of the process. As a trusted M&A advisor serving Scottsdale, Phoenix, and businesses across Arizona and beyond, we’re here to help you move forward with confidence.
