New legislation will bring some clarity to the mergers and acquisitions process for transactions with private companies.

President Joe Biden recently signed an omnibus bill package for fiscal year 2023, which included the Small Business Mergers, Acquisitions and Brokerage Simplification. This legislation provides an exemption for M&A advisers and business brokers from the U.S. Securities and Exchange Commission (SEC) broker-dealer registration when serving private company buyers and sellers.

The new exemption is an amendment to the Securities Exchange Act of 1934 and seeks to correct the existing regulatory regime by acknowledging the difference in M&A transactions for public companies versus private companies.

“The purpose for this whole effort started with the ambiguity created when our ‘one-size-fits-all’ federal system of securities regulation is applied to private company merger and acquisitions transactions,” said Shane Hansen, partner at Warner Norcross + Judd.