Regulatory Changes Proposed for Investment Banks

A new bill has recently been introduced to the House that would simplify SEC registration for investment banks, making the process much simpler and saving a great deal of regulatory costs.

Currently, investment banks are required to register as broker-dealers with the SEC, putting them in the same class as giant brokerage firms. Initial SEC membership can cost these small M&A firms as much as $150,000 and then up to $75,000 annually. These costs become prohibitive and have a significant impact on the sale or purchase of small businesses.

Rep. Bill Huizenga (R-Mich.) introduced the new bill earlier this month. The law would apply to firms with annual earnings of less than $25 million and annual gross revenue of less than $250 million. In addition to simplifying the SEC registration process, it would exempt these M&A brokers from FINRA membership and regulation.

If the bill passes, it would greatly reduce the costs associated with buying or selling a small business and in turn, protect more small business jobs at those companies.