How the SEC M&A Broker Exemption Works in 2026
by Raises.com
This article is general information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.
The M&A broker exemption, Section 15(b)(13) of the Securities Exchange Act, exempts an M&A broker from SEC broker-dealer registration when it sells an eligible privately held company to a buyer who will control and run it. The exemption covers the broker, never the buyer. A buyer raising equity from passive investors needs a separate exemption for that raise.
Who qualifies for the M&A broker exemption
An M&A broker qualifies when it effects securities transactions solely to transfer ownership of an eligible privately held company. The broker must reasonably believe the buyer will control the company after closing. The broker must also believe the buyer will be active in its management.
An eligible privately held company has no class of securities registered, or required to be registered, with the SEC under Section 12. An eligible privately held company also passes a size test in the fiscal year before the broker was first engaged, and either test alone is enough.
- Size: EBITDA under $25,000,000, gross revenues under $250,000,000, or both.
- Control: the power to direct management or policies, presumed when the buyer can vote, or sell, 25 percent or more of a class of voting securities (for a partnership or LLC, 25 percent or more of capital on dissolution or of contributed capital).
- Active management, the statute's three examples: electing executive officers, approving the annual budget, or serving as an executive or other executive manager.
- Effective date: March 29, 2023, under the Consolidated Appropriations Act, 2023, enacted December 29, 2022.
- The 2014 letter: SEC staff withdrew its January 31, 2014 M&A Brokers no-action letter when the statute took effect.
- Inflation: the two dollar limits adjust every five years by the Employment Cost Index, rounded to the nearest $100,000, first on December 29, 2027.
- Primary source: 15 U.S.C. 78o(b)(13).
The M&A broker exemption took effect on March 29, 2023. The dollar limits track the Employment Cost Index for wages and salaries of private industry workers, so the first change lands on December 29, 2027, and a deal signed in 2026 still uses $25,000,000 and $250,000,000. Guides citing the 2014 letter are out of date.
A seller paid in the buyer's securities must receive, or have reasonable access to, the buyer's most recent fiscal year-end financial statements. Those statements include a balance sheet dated not more than 120 days before the offer.
M&A broker exemption vs SEC-registered broker-dealer
An M&A broker under the exemption can do far less than a registered broker-dealer. Every left-hand cell below comes from Section 15(b)(13).
| Question | M&A broker under the exemption | SEC-registered broker-dealer |
|---|---|---|
| SEC registration | Exempt from registration under Section 15 | Registered with the SEC |
| Target size limit | EBITDA under $25,000,000 or gross revenues under $250,000,000 | No statutory size cap |
| Buyer must control and be active | Yes | Not a condition of registration |
| Can sell to passive investors | No (exclusion 8) | May place securities with passive investors |
| Can form the buyer group | No (exclusion 7) | Not limited by Section 15(b)(13) |
| Can hold deal funds | No (exclusion 1) | Not limited by Section 15(b)(13) |
| Can raise capital for a fund or SPV | No, passive investors are outside it | May place securities with passive investors |
| State law still applies | Yes | Yes |
Nine activities the M&A broker exemption does not cover
The M&A broker exemption ends if the broker does any of these nine things. A broker who crosses one loses the exemption.
- 1. Custody: receiving, holding, transmitting or having custody of the funds or securities exchanged.
- 2. Public offerings: engaging for an issuer in a public offering of registered securities.
- 3. Shell companies: a transaction involving a shell company, other than a business combination related shell company.
- 4. Financing: providing financing for the deal, directly or through affiliates.
- 5. Third-party loans: helping a party obtain financing from an unaffiliated third party without complying with other applicable law, including Regulation T where it applies, and disclosing its compensation in writing.
- 6. Both sides: representing buyer and seller without clear written disclosure and written consent from both.
- 7. Assembled groups: facilitating a transaction with a group of buyers formed with the broker's assistance.
- 8. Passive buyers: a transfer of ownership to a passive buyer or a group of passive buyers.
- 9. Binding a party: binding a party to the transfer.
A broker barred or suspended from association with a broker or dealer is disqualified, and so is one whose officers, directors, members, managers, partners or employees carry that bar. Ask before you sign. The federal exemption does not preempt state securities law. The broker still needs a state registration or a state exemption wherever it works.
The M&A broker exemption does not cover raising capital from investors
The M&A broker exemption belongs to the broker and says nothing about how the buyer funds the equity. Exclusion 7 bars a deal with a buyer group the broker helped form. Exclusion 8 bars a sale to passive buyers. Those two exclusions mean a broker under the exemption cannot assemble your investor group or sell the company to people who will only write a check.
Money from passive investors into an acquisition vehicle is a securities offering by the buyer. That offering needs its own exemption, usually Rule 506(b), which allows up to 35 non-accredited investors, or Rule 506(c). Form D is due within 15 days of the first sale. Raises.com® builds that part, the buyer's offering structure (PPM, subscription agreement, operating agreement, CFA financial proformas and data room), and is not a broker-dealer, charging a flat fee with no success fee.
Fees are the other trap. Paying a transaction-based fee to an unregistered person for finding investors sits outside the M&A broker exemption, because the exemption only reaches the sale of a company to an active, controlling buyer. Keep the two apart.
Six checks a buyer runs on a broker
Run these six checks before the LOI is signed. Each check maps to a line in the statute.
1. Size
Get the target's EBITDA and gross revenues for the fiscal year before the broker was engaged. One figure under its limit is enough.
2. Control at 25 percent
Your stake after closing should carry the right to vote, or sell, 25 percent or more of a class of voting securities.
3. Your active role
Write your role into the deal documents. Officer elections, budget approval or an executive seat all count. A hands-off buyer pushes the broker into exclusion 8.
4. Who holds the money
The price moves through an escrow agent or a closing agent. Broker custody ends the exemption.
5. Dual representation
A broker who also represents the seller needs clear written disclosure and written consent from both sides. File the signed copy.
6. Loan fees
A broker who helps you find an unaffiliated lender must disclose its compensation in writing. A broker who funds the loan itself is outside the exemption.
Two Raises.com® clients who fit the active-buyer profile
Cody Sechelski, CEO of Masterbuilt Ventures Holdings, LLC, closed the first acquisition of his operator-led Texas HVAC roll-up in 2026. Raises.com® advised on capital structure and lender sourcing, and roughly seven months after he booked a call he closed a profitable, family-run HVAC business with an equity-light structure and seller participation. Operator-led is the point.
Henry Iwunze worked with Raises.com® to go from a first-time acquirer to a multi-deal operator. His first deal was the acquisition of Integrity Health Group, Inc., and he immediately began executing on two subsequent acquisitions. Neither file shows a broker relying on Section 15(b)(13).
Frequently asked questions
What is the M&A broker exemption?
The M&A broker exemption is Section 15(b)(13) of the Securities Exchange Act, which frees a qualifying M&A broker from SEC broker-dealer registration. The exemption applies only to sales of eligible privately held companies.
Who qualifies for the M&A broker exemption?
A broker selling a company with EBITDA under $25,000,000 or revenues under $250,000,000 to a controlling, active buyer qualifies. Control is presumed at 25 percent.
Does the M&A broker exemption cover raising capital from investors?
No, the M&A broker exemption excludes any transfer to passive buyers. Equity from passive investors is the buyer's own offering under Regulation D.
Does the M&A broker exemption apply under state law?
No, the M&A broker exemption is federal and does not preempt state securities law. A broker still needs a state registration or a state exemption.
When did the M&A broker exemption take effect?
The M&A broker exemption took effect on March 29, 2023. SEC staff withdrew its 2014 M&A Brokers no-action letter that day.
When do the M&A broker exemption dollar limits change?
The dollar limits first adjust on December 29, 2027. Until then they stay at $25,000,000 and $250,000,000.
Raises.com® builds the structure behind an acquisition raise, the PPM, subscription and operating agreements, CFA financial proformas and the data room, so the raise is legally and financially sound. Your securities counsel confirms the exemption for your deal. Read more at https://raises.com/buy-a-business, or book a strategy call at https://raises.com/call.
General information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.