M&A Advisory Regulation · Section 15(b)(13)

Do Independent M&A Advisors Need a FINRA Licence in 2026? The M&A Broker Exemption Explained

11 min read

You may have seen this referred to as the "M-38 exemption." That is not the formal legal designation — the correct name is the M&A Broker Exemption, codified as Section 15(b)(13) of the Securities Exchange Act of 1934. The substance is what matters and this guide covers it in full.

If you are considering going independent as an M&A advisor, this is the single most important regulatory question you will face. The current results on Google for this question are either SEC press releases written for securities lawyers or K&L Gates articles that assume you already understand broker-dealer registration law. Neither is written for a practitioner who needs a direct answer.

This page gives you that answer — verified against the statute, effective as of March 29, 2023, and updated for 2026.

Legal disclaimer, stated once: This is general regulatory information for educational purposes. It is not legal advice. The M&A Broker Exemption has specific technical conditions that vary by state and by transaction structure. Before operating as an independent M&A advisor, confirm your specific situation with a securities attorney. This page gives you the foundation to have that conversation intelligently — not a substitute for it.

1. The Short Answer

Direct answer — verified against Section 15(b)(13), effective March 2023

For most independent advisors working on deals involving privately held companies with EBITDA under $25 million OR gross revenues under $250 million, federal SEC/FINRA broker-dealer registration is not required. The exemption has been statutory law since March 29, 2023. The catch: federal exemption does not eliminate state registration requirements, which vary by jurisdiction and are not covered by the same law.

The answer before March 29, 2023 was more complicated. Independent M&A brokers operated under a 2014 SEC No-Action Letter — an informal staff position, not a legal right. The 2023 legislation changed that permanently by creating a statutory exemption.

2. What Changed on March 29, 2023

The law and where it came from

On December 29, 2022, President Biden signed the Consolidated Appropriations Act of 2023 (H.R. 2617). Buried inside this large spending bill was Section 501 of Title V of Division AA — a provision that added new subsection 15(b)(13) to the Securities Exchange Act of 1934. The amendment became effective 90 days later, on March 29, 2023.

Before this, the legal basis for unregistered M&A brokers was an SEC No-Action Letter issued January 31, 2014. No-Action Letters are informal staff guidance — useful but revocable and legally weaker than statute. Congress essentially read the 2014 letter, agreed with it, and codified it into law. With one significant addition the letter did not have: a size cap.

What "codified" means practically

Before 2023: if you were an unregistered M&A broker and the SEC changed its mind about the 2014 letter, you were exposed. The guidance could be withdrawn without legislation.

After March 29, 2023: the exemption is written into the Exchange Act. Changing it requires an act of Congress. Your legal footing is statute, not staff guidance. This is a material difference for anyone building a professional practice around independent advisory work.

The practical change: Independent M&A brokers now have a statutory right to earn fees on qualifying transactions without SEC broker-dealer registration. This right existed informally before 2023. It is now permanent unless Congress affirmatively repeals it.

3. The Eligibility Threshold: What Counts as an "Eligible Privately Held Company"

The exemption only applies to transactions involving an "eligible privately held company." This is a defined term in the statute with three specific conditions.

Condition 1 — Not a public company

The target company must have no class of securities registered or required to be registered with the SEC under Exchange Act Section 12, and must not be a reporting company under Exchange Act Section 15(d). In plain English: it cannot be a public company, a company with publicly traded securities, or a company required to file periodic reports with the SEC. A standard privately held operating business in the $1M–$50M enterprise value range almost always satisfies this.

Condition 2 — The size threshold (OR, not AND)

In the fiscal year immediately before the year in which you are initially engaged on the transaction, the target company must meet at least one of these conditions:

  • EBITDA less than $25 million
  • Gross revenues less than $250 million

These are OR conditions. Meeting either one qualifies the company. A $150M revenue business with $8M EBITDA qualifies under the EBITDA test. A $20M revenue business with $30M EBITDA (unusual but possible in some asset structures) qualifies under the revenue test.

The practical implication: the vast majority of businesses in the lower-middle market — the $2M–$50M enterprise value range where most independent advisors operate — comfortably satisfy at least one of these conditions.

Condition 3 — The inflation adjustment

The statute includes an inflation adjustment mechanism: the EBITDA and revenue thresholds are subject to adjustment every five years from the date of enactment. The first adjustment is due approximately December 2027. In practice, these thresholds are expected to move modestly upward over time, not downward.

The threshold in one sentence: If the target company is privately held and has EBITDA under $25M or revenues under $250M in the prior fiscal year, it is an "eligible privately held company" and transactions involving it can be facilitated without SEC/FINRA registration under the M&A Broker Exemption.

4. What the Exemption Covers — and Doesn't Cover

✓ Covered under the exemption
✗ Not covered — registration still required
✓ CoveredEarning success fees on the sale of an eligible privately held company
✗ Not coveredAny deal involving a public company or company with registered securities
✓ CoveredRepresenting the seller in a qualifying M&A transaction
✗ Not coveredTarget company with EBITDA over $25M AND revenues over $250M
✓ CoveredRepresenting the buyer in a qualifying transaction
✗ Not coveredCapital raising, equity offerings, or securities placements
✓ CoveredRepresenting both buyer and seller with written informed consent from both parties
✗ Not coveredShell company transactions (except business combination-related shells)
✓ CoveredCharging retainers and success fees for qualifying advisory services
✗ Not coveredAny transaction where the broker provides or arranges financing
✓ CoveredAsset sale transactions and stock/equity transfer transactions
✗ Not coveredSituations where the buyer will be passive post-close and not actively manage

5. The 8 Activities That Void the Exemption

Section 15(b)(13) explicitly lists activities that — if engaged in — remove the exemption and require full broker-dealer registration. These are not grey areas. Each one is a hard line.

# Prohibited activity What it means in practice
1 Receiving, holding, transmitting, or having custody of client funds or securities in connection with the transaction You cannot act as escrow or hold deal proceeds at any point. Wire goes from buyer to seller directly, or through a licensed escrow agent.
2 Engaging in a public offering on behalf of an issuer You cannot raise capital or run any securities offering. Your role is limited to facilitating ownership transfer.
3 Engaging on behalf of a party in a transaction involving a shell company (except business combination-related shells) Shell company deals require registration. The exception covers reverse mergers and similar business combination structures.
4 Directly or indirectly providing financing related to the transaction You cannot lend money, introduce lenders in an advisory capacity, or participate in seller financing arrangements. If SBA or seller financing is involved, your role must be clearly advisory only.
5 Assisting any party to obtain financing without complying with all applicable laws and providing written disclosure of any compensation received If you refer a buyer to a lender and receive any fee from that lender, you must fully disclose it in writing and comply with applicable broker laws. Most independent advisors avoid this entirely.
6 Representing both buyer and seller without providing written disclosure to both parties and obtaining written consent from both Dual representation is permitted — but only with documented written consent from both parties. Verbal acknowledgement is not sufficient.
7 Facilitating a transaction with a group of buyers that the M&A broker helped form or assemble You can represent a buyer group that already existed before you engaged with them. You cannot assemble or organise that group yourself.
8 The broker or any associated person has been barred from association with a broker-dealer by the SEC, any state, or any self-regulatory organisation, or suspended from such association Prior regulatory action against you or your team members voids the exemption entirely. Clean regulatory record is a prerequisite, not just a best practice.
The financing prohibition is the most commonly misunderstood. Many independent advisors informally refer buyers to their banking contacts as a value-added service. Under the exemption, even this referral — if it produces any compensation or constitutes "assisting" in obtaining financing — requires full legal compliance and written disclosure. The safest approach: keep the deal advisory and the financing referral completely separate, with no fee arrangement connecting the two.

6. The State Law Problem: Why Federal Clarity Isn't the Whole Answer

This is the section that every law firm article mentions briefly and then moves on from. It deserves more attention because it is the most common source of regulatory risk for independent advisors who correctly rely on the federal exemption and incorrectly assume it covers everything.

What the federal exemption does NOT do

Section 15(b)(13) is a federal law that exempts qualifying M&A brokers from SEC broker-dealer registration. It does not preempt or supersede state securities laws. State registration requirements are entirely separate and remain in full force.

The North American Securities Administrators Association (NASAA) adopted a Model M&A Broker Rule that provides a parallel state-level exemption. However, as of 2026, only approximately 22 states have adopted some version of this model rule. The other 28 states either have no equivalent exemption or have different registration requirements that vary substantially from the federal framework.

The practical state-level exposure

If you operate from a state without a parallel exemption, or if your client's business is located in a state with strict broker registration requirements, you may need state registration even if you are fully covered by the federal exemption.

Some states mirror the FINRA registration process closely — meaning the state registration requirement is materially similar to the federal one. Some states have lighter-touch requirements. A few have no meaningful M&A broker registration framework at all.

The practical rule: Before operating independently in any state, confirm both (1) the state's position on M&A broker registration and (2) whether that state has adopted a version of the NASAA Model Rule. This is a 30-minute conversation with a local securities attorney and it eliminates the most common regulatory gap in independent advisory practices.

The buyer and target location matter too

State requirements typically apply based on where the broker operates, where the company being sold is located, and in some cases where the buyer is located. A California-based advisor selling an Arizona business to a New York buyer potentially has state law exposure in three jurisdictions. This is not a reason to avoid the work — it is a reason to understand it before you start.

7. Who Still Needs FINRA Registration in 2026

The M&A Broker Exemption covers a large portion of independent advisory activity but not all of it. The following profiles still require broker-dealer registration regardless of deal size or structure.

  • Any advisor working on deals involving public companies. The exemption is limited to privately held companies with no registered securities class. Any transaction touching a public company — even a subsidiary sale — falls outside it.
  • Advisors targeting deals above both thresholds simultaneously. A target company with EBITDA over $25M AND revenues over $250M does not qualify, regardless of how the deal is structured.
  • Anyone providing or arranging financing. This is absolute. Any role that involves directing, arranging, or facilitating financing — including soft referrals for compensation — requires separate analysis and likely registration.
  • Advisors running capital raise processes. The exemption covers ownership transfer. It does not cover raising equity capital for growth purposes, regardless of the company's size.
  • Anyone who has been barred or suspended by the SEC, FINRA, or any state regulator. The clean record requirement applies regardless of deal size. Prior regulatory action is a permanent disqualifier for the exemption.

If your practice includes any of the above alongside qualifying M&A advisory work, registration covers the non-qualifying activities and you may choose to register for the full practice even if the M&A component is individually exempt.

8. Deal Eligibility Checker

Check your deal's exemption status
Does this deal fall under Section 15(b)(13)?
Is the target company privately held — no class of securities registered with the SEC and no SEC reporting obligations?
Does the target company have EBITDA under $25M OR gross revenues under $250M in the prior fiscal year?
Will the buyer actively operate and control the acquired business after closing (25%+ voting interest or equivalent)?
Are you avoiding all 8 prohibited activities — no custody of funds, no financing, no public offering, no shell company transaction?
Are you and all associated persons free of any bar or suspension from association with a registered broker-dealer?
Federal exemption status

9. The Practical Pre-Launch Checklist

Before operating as an independent M&A advisor, work through these six items. This is not legal advice — it is the minimum due diligence that any practitioner should complete before taking on a first mandate.

  • Confirm your state's position on M&A broker registration. Contact a local securities attorney and ask specifically whether your state has adopted the NASAA Model M&A Broker Rule and what registration, if any, is required for qualifying transactions.
  • Structure your engagement letter to stay within the exemption. The engagement letter should make clear that you are not handling client funds, not providing financing, and that your compensation is advisory-based. See the fee structure guide for standard retainer and success fee language.
  • Document dual representation in writing if it arises. If you ever represent both buyer and seller in the same transaction, obtain written consent from both parties before the engagement proceeds. No exceptions.
  • Keep financing and advisory completely separate. If you refer a buyer to a lender, structure the referral with no compensation from the lender and no fee-sharing arrangement. Lender introductions that produce any income to you require separate legal analysis.
  • Confirm buyer control intent before signing the engagement. The exemption requires that the buyer will actively operate the acquired business. If a prospective buyer is a passive investor with no management role, the transaction may not qualify.
  • Run a background check on yourself and any associated persons. Any prior regulatory bar or suspension from broker-dealer association permanently voids the exemption. This is not a condition you can cure mid-engagement.
For the broader question of what licensing requirements apply across different markets — US, UK, Australia, and Canada — see the business broker licence requirements guide →

10. FAQ: M&A Broker Exemption

For most independent advisors on deals involving privately held companies with EBITDA under $25M or gross revenues under $250M, the answer since March 29, 2023 is no — federal FINRA/SEC registration is not required. Section 15(b)(13) of the Exchange Act provides a statutory exemption. However, state registration requirements are separate and the federal exemption does not eliminate state-level obligations in many jurisdictions.
The M&A Broker Exemption is the informal name for Section 15(b)(13) of the Securities Exchange Act of 1934, enacted December 29, 2022 as part of the Consolidated Appropriations Act (H.R. 2617) and effective March 29, 2023. It exempts qualifying M&A brokers from SEC broker-dealer registration requirements when facilitating the transfer of ownership of eligible privately held companies. It codified and expanded a 2014 SEC No-Action Letter that previously provided similar but weaker guidance.
The target company must have EBITDA less than $25 million OR gross revenues less than $250 million in the fiscal year immediately before the year in which the M&A broker is initially engaged. These are OR conditions — meeting either threshold qualifies. The thresholds are subject to inflation adjustment every five years from enactment (first adjustment due approximately December 2027).
No. The federal exemption under Section 15(b)(13) only addresses federal SEC and FINRA registration. State securities laws are completely separate and not preempted by the federal law. Only approximately 22 states have adopted a parallel state exemption based on the NASAA Model M&A Broker Rule. In states without a parallel exemption, an unregistered M&A broker may still require state securities registration even if fully covered federally.
Yes, but only with written informed consent from both parties. The exemption permits dual representation if the M&A broker provides written disclosure to both parties and obtains written consent from both. Representing both parties without this written documentation voids the exemption for that transaction.
Deals not covered: transactions involving public companies or companies with registered securities; targets with EBITDA over $25M AND revenues over $250M; capital raising or securities offerings; shell company transactions (with limited exceptions); transactions where the broker provides financing; or deals where the buyer will not actively operate and control the business after closing.
The exemption is voided by: (1) handling or having custody of client funds or securities; (2) conducting public offerings; (3) facilitating shell company transactions (except business combination shells); (4) directly providing transaction financing; (5) assisting parties in obtaining financing without full legal compliance and written disclosure; (6) representing both buyer and seller without written informed consent from both; (7) facilitating transactions with buyer groups the broker helped form; or (8) broker or associated persons being barred/suspended from broker-dealer association. See the full table in Section 5 above.
The exemption was signed into law December 29, 2022 as part of the Consolidated Appropriations Act of 2023 (H.R. 2617) and became effective 90 days later on March 29, 2023. Before this date, independent M&A brokers relied on a 2014 SEC No-Action Letter — informal staff guidance rather than statutory law. The 2023 legislation converted that informal guidance into a permanent statutory right.

Map Your Practice Structure to Your First Mandate

The regulatory framework is now clear. The next question is practical: does your specific background, network, and sector make independent M&A advisory viable — and what does the first mandate look like? The Career Strategy Session is a 3-hour working session that answers that question against your specific situation.

  • Whether your existing network supports qualifying deal sizes under the exemption
  • The engagement letter structure that keeps your practice inside the exemption
  • Which deal types and sectors your background makes most credible for a first mandate
  • A realistic year-one income model based on your starting position
Career Strategy Session — $997 →
About the Author
Den Unglin — Practising M&A Exit Adviser and Business Broker
Den Unglin M&A Exit Adviser · Broker

This guide was written for practitioners, not lawyers.

Every regulatory detail on this page is verified against the actual statutory text of Section 15(b)(13) and cross-referenced against multiple authoritative law firm analyses of the 2023 exemption.

Den is a practising business broker and M&A exit adviser with 18+ years of direct P&L experience across 50+ business types and 12 markets. He advises on transactions across 4 continents and maintains relationships with a global network of PE and family offices.

The regulatory section of every client engagement begins with exactly the analysis on this page — understanding what the exemption covers, what the state law overlay requires in the relevant jurisdiction, and how to structure the engagement letter to stay inside both.

↗ Verify on LinkedIn
18+Years direct
P&L experience
50+Business types
across the career
12Country
markets
4Continents advised
US · EU · ASIA · AU