The Acquiry acquisition industry is a high pressure, exciting and fast growing market. In an increasingly cut-throat marketplace, the skill of an Acquisition Broker is essential. An acquisition is a major investment for any company and the selection of an experienced broker adds to the overall success of an investment. A thorough knowledge of the investment process is an asset. As an independent consultant, an Acquisition Broker will be an asset to any firm involved in mergers and acquisitions.
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Acquisition brokers (CBA) perform a variety of tasks, including: assisting companies in capital raising, advising companies and wealthy individuals on corporate restructuring and capital raising, acting as fiduciary agents for the sale of unregistered securities to eligible insiders, conducting due diligence and pre-qualification of acquisition candidates, conducting negotiations, interviewing potential acquisition candidates and reviewing financial statements. Most experienced acquisition brokers have significant experience in finance, mergers and acquisitions, finance, accounting and real estate. An expert broker will have strong relationships with key individuals in the transaction and financial markets. They will also possess detailed knowledge of the targeted firm’s market, sector and competition.
The fact is that an independent acquisition broker is not exempt from registration under the Sarbanes-Oxley Act (SOX) or Rule 45a. In SOX, an acquisition broker is subject to the same securities laws and regulations as other registered professionals. As such, they must disclose material information in a plan of operation that is filed with the SEC. Also, as part of their duties, they must file reports with the SEC on a timely basis, including a non-confidential version.
There are many reasons why some brokers choose not to be board certified. The most common are retirement, lack of board expertise, compliance issues with federal and state securities laws, anti-business sentiment amongst brokerage firms and customer accounts that do not meet the fiduciary standard. Some companies that are not registered or have improperly filed plans, may face heavy fines if they fail to comply with the SOX or other applicable federal and state laws. Many state regulatory agencies have taken action against brokerage houses that were involved in fraudulent transactions, or involved in practices that failed to provide reasonable protection for customer accounts. These agencies have also fined and/or suspended trading activities from some of the largest banks and investment firms in the country, including Merrill Lynch, Lehman Brothers and Bear Stearns.
Another frequently overlooked SOX rule relates to the extent of the control of a privately held company. The SOX restricts broker-dealers from engaging in indirect control of a publicly held company. It does so by specifically limiting “managing” or “directing” the affairs of a privately held company. By managing or directing the affairs of a publicly held company, brokers commit an act of securities fraud. Broker-dealers cannot manage or direct the trading of a company without simultaneously violating the SOX rule.
In summary, these five rules (or any combination of them) can be used by companies and brokers to ensure compliance with the SOX. Each one of these rules is intended to protect clients, investors and creditors. Brokers must provide and maintain adequate business and client service records to substantiate the services provided, comply with applicable federal and state laws, retain and utilize proper corporate banking secrecy, and maintain proper control of client accounts. In addition, broker-dealers must provide and maintain accurate records of the securities held, ensure compliance with applicable reconciliation requirements, restrict unnecessary third-party involvement in the transaction process, retain and use proprietary trading information, and provide appropriate monitoring and compliance tools. In essence, brokers must make every effort to ensure that the securities they buy and sell are “tainable” and “underwriters” must thoroughly understand and strictly comply with the SOX rules.
