Mergers and acquisitions are among the most complex transactions in business. They bring together buyers, sellers, advisors, legal counsel, and investors in a high-stakes process that can span months or years. Yet compliance is the very factor that can determine whether a deal closes successfully or falls apart.
Since the passage of the Securities Exchange Act of 1934, anyone “engaged in the business of effecting transactions in securities for the account of others” must be registered with the SEC or affiliated with a broker-dealer. For decades, this rule cast a shadow over M&A advisors, business brokers, and placement agents who weren’t sure if their work fell squarely under the definition of securities activity.
Congress addressed some of these concerns in 2023 by creating a narrow exemption for certain M&A brokers. But this exemption didn’t eliminate all the complexity. State securities laws, FINRA oversight, and cross-border rules continue to shape the way M&A professionals must operate.
For M&A teams, placement agents, and independent RIAs working in today’s dealmaking environment, understanding these requirements—and aligning with the right compliance partner—is no longer optional.
The Compliance Challenges in Modern M&A
1. A Patchwork of Federal and State Rules
The 2023 exemption clarified some situations in which M&A brokers don’t need to register federally. However, state securities regulators may still impose their own requirements.
Imagine a sell-side advisor working with a middle-market manufacturing company that has operations in three states. While one state may recognize the federal exemption, another may require registration, creating friction and legal exposure.
2. Success Fee Sensitivities
In M&A and private placements, success fees are standard. They align advisor incentives with client outcomes and form the backbone of most compensation agreements. But they are also heavily scrutinized by regulators.
If an intermediary isn’t affiliated with a broker-dealer, their right to collect success fees may be challenged. Buyers can dispute payments, and attorneys may argue that compensation arrangements are unenforceable if the advisor is not properly licensed.
3. Cross-Border Complexity
M&A increasingly crosses international borders. A European private equity fund acquiring a U.S. target, or an Asian investor seeking access to a growth-stage U.S. tech company, are now common scenarios.
Without SEC Rule 15a-6 chaperoning, foreign advisors may inadvertently violate U.S. securities laws when engaging American investors. This can lead to regulatory scrutiny and delays.
4. Investor Protection and Litigation Risk
Beyond regulatory requirements, there is a broader principle at play: investor protection. The compliance framework around M&A exists to prevent fraud, ensure fair disclosure, and protect market integrity. Advisors who operate outside that framework expose not only themselves but also their clients to reputational and legal risks.
The Consequences of Getting It Wrong
The risks of working with unlicensed or non-compliant advisors extend beyond the advisor themselves.
- For companies: Paying an unregistered intermediary for securities-related services can be a violation of federal law. This may trigger penalties, invalidate fee agreements, or even result in litigation.
- For advisors: Acting without proper licensing can result in regulatory investigations, fines, and reputational damage.
- For investors: Deals involving non-compliant intermediaries can create doubts about the legitimacy of the transaction, eroding trust and potentially scaring off capital.
In an industry where trust and credibility are everything, these risks can be catastrophic.
Why Broker-Dealer Sponsorship is the Solution
To navigate this complexity, affiliation with a FINRA-member broker-dealer provides the structure and oversight needed for compliance. Broker-dealers ensure that M&A teams, placement agents, and RIAs have the regulatory foundation to:
- Legally collect success fees
- Remain compliant across multiple states
- Operate effectively in cross-border transactions
- Access licensing sponsorship (Series 7, 63, 79, and 82)
- Protect their reputation and their clients
In other words, broker-dealer sponsorship isn’t just a legal formality—it’s a business enabler.
FINIQ: A Compliance Partner for M&A Professionals
This is where FINIQ Capital makes a difference. As a FINRA-member broker-dealer, FINIQ partners with independent dealmakers to remove the uncertainty around compliance.
FINIQ offers:
- Licensing sponsorship for Series 7, 63, 79, and 82 exams
- A white-label broker-dealer platform, allowing teams to keep their brand while relying on FINIQ’s compliance oversight
- Comprehensive regulatory coverage across SEC, FINRA, and 50-state rules
- SEC Rule 15a-6 chaperoning, enabling international advisors to access U.S. investors legally
- AML, due diligence, and reporting support to protect both advisors and their clients
By providing both the regulatory framework and the operational infrastructure, FINIQ helps M&A teams, placement agents, and RIAs focus on closing deals, not worrying about compliance gaps.
LEARN MORE ABOUT FINIQ Compliance Services
Building a Stronger Foundation for Deals
Compliance is not just about avoiding penalties, it’s about building confidence in the marketplace. Companies want to know their advisors are credentialed. Investors want assurance that transactions are handled correctly. And advisors want the certainty that their fees are protected.
With FINIQ, all three stakeholders—companies, investors, and advisors benefit from a platform that puts compliance at the core of dealmaking. Today, FINIQ is trusted by over 130 bankers, advisors, and other professionals, a testament to the platform’s ability to streamline transactions while maintaining the highest standards of integrity.
FINIQ helps M&A professionals build transactions on a solid foundation. Contact us today to learn how our broker-dealer sponsorship and compliance services can support your next deal.
References
Troutman Pepper — New Federal Statutory M&A Broker Exemption to Take
Effect March 29th (2023)
https://www.troutman.com/insights/locke-lord-quickstudy-new-federal-statutory-manda-broker-exemption-to-take-effect-march-29th/
Gordon Rees Scully Mansukhani — Codified M&A Broker Exemption Effective
on March 29, 2023
https://www.grsm.com/insight/codified-ma-broker-exemption-effective-on-march-29-2023/
