1. A. Except as provided in sections B and C below, a Merger and Acquisition Broker shall be exempt from registration pursuant to Section 35-1-401.

2. B. Excluded Activities. A Merger and Acquisition Broker is not exempt from registration under this regulation if such broker does any of the following:

   1. (1) directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction;
   2. (2) engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the United States Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. 781, or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under the Securities Exchange Act of 1934 Section 15 subsection (d), 15 U.S.C. 78o(d);
   3. (3) engages on behalf of any party in a transaction involving a shell company, other than a business combination related shell company;
   4. (4) directly, or indirectly through any of its affiliates, provides financing related to the transfer of ownership of an eligible privately held company;

   5. (5) assists any party to obtain financing from an unaffiliated third party without

      1. (a) complying with all other applicable laws in connection with such assistance, including, if applicable, Regulation T (12 C.F.R. 220 et seq.); and
      2. (b) disclosing any compensation in writing to the party;
   6. (6) representing both the buyer and the seller in the same transaction without providing clear written disclosure as to the parties the broker represents and obtaining written consent from both parties to the joint representation;
   7. (7) facilitates a transaction with a group of buyers formed with the assistance of the Merger and Acquisition Broker to acquire the eligible privately held company;
   8. (8) engages in a transaction involving the transfer of ownership of an eligible privately held company to a passive buyer or group of passive buyers; or
   9. (9) binds a party to a transfer of ownership of an eligible privately held company.

3. C. Disqualifications. A Merger and Acquisition Broker is not exempt from registration under this regulation if such a broker, including any officer, director, member, manager, partner or employee of such broker:

   1. (1) has been barred from association with a broker or dealer by the Securities Commissioner, any state, or any self-regulatory organization; or
   2. (2) is suspended from association with a broker or dealer.
4. D. Nothing in this regulation shall be construed to limit any other authority of the Securities Commissioner to exempt any person, or any class of persons, from any provision of the South Carolina Uniform Securities Act of 2005, or from any provision of any rule or regulation thereunder.

5. E. Definitions. As used in this regulation,

   1. (1) “Business Combination Related Shell Company” means a shell company that is formed by an entity that is not a shell company

      1. (a) solely for the purpose of changing the corporate domicile of that entity solely within the United States; or
      2. (b) solely for the purpose of completing a business combination transaction, as defined under Section 230.165(f) of title 17, Code of Federal Regulations, among one or more entities other than the company itself, none of which is a shell company.

   2. (2) “Control” means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. There is a presumption of control if, upon completion of a transaction, the buyer or group of buyers

      1. (a) has the right to vote twenty-five percent or more of a class of voting securities or the power to sell or direct the sale of twenty-five percent or more of a class of voting securities; or
      2. (b) in the case of a partnership or limited liability company, has the right to receive upon dissolution, or has contributed, twenty-five percent or more of the capital.

   3. (3) “Eligible Privately Held Company” means a privately held company that meets both of the following conditions:

      1. (a) the company does not have any class of securities registered, or required to be registered, with the United States Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. 781, or with respect to which the company files, or is required to file, periodic information, documents, and reports under subsection (d), 15 U.S.C. 78o(d); and

      2. (b) in the fiscal year ending immediately before the fiscal year in which the services of the Merger and Acquisition Broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions, determined in accordance with the historical financial accounting records of the company:

         1. (i) the earnings of the company before interest, taxes, depreciation, and amortization are less than twenty-five million dollars; or
         2. (ii) the gross revenues of the company are less than two hundred fifty million dollars.

   4. (4) “Merger and Acquisition Broker” means a broker, and any person associated with a broker engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving securities or assets of the eligible privately held company if the broker reasonably believes that

      1. (a) upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert

         1. (i) will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and

         2. (ii) directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and with the assets of the eligible privately held company, including without limitation, for example, by

            1. (A) electing executive officers;
            2. (B) approving the annual budget;
            3. (C) serving as an executive or other executive manager; or
            4. (D) carrying out such other activities as the Securities Commissioner may, by rule, determine to be in the public interest; and
      2. (b) if any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent fiscal year-end financial statements of the issuer of the securities as customarily prepared by the management of the issuer in the normal course of operations and, if the financial statements of the issuer are audited, reviewed, or compiled, any related statement by the independent accountant, a balance sheet dated not more than one hundred twenty days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and material loss contingencies of the issuer.

   5. (5) “Shell Company” means a company that at the time of a transaction with an eligible privately held company

      1. (a) has no or nominal operations; and

      2. (b) has no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.

         (F)¹ Inflation Adjustment. Each dollar amount in subsection (E)(3)(b) above shall be adjusted as follows:

   6. (1) on the date that is five years after the date of the enactment of this regulation, and every five years thereafter, by dividing the annual value of the Employment Cost Index For Wages and Salaries, Private Industry Workers, or any successor index, as published by the Bureau of Labor Statistics, for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index for the calendar year ending December 31, 2025, and multiplying the quotient obtained by such dollar amount in subsection (E)(3)(b) above; and

   7. (2) each dollar amount determined under subsection (F)(1) above shall be rounded to the nearest multiple of one hundred thousand dollars.

      ¹So in original.

HISTORY:Added by SCSR 49-5 Doc. No. 5365, eff May 23, 2025.