SEC Division of Trading and Markets Grants No-Action Relief to Non-U.S. Mergers and Acquisition Advisor in Conduct of Activity with U.S. Targets

May 30, 2013

On May 28, 2013, the staff of the Division of Market Regulation (“Staff”) at the U.S. Securities and Exchange Commission (“SEC” or “Commission”) granted no-action relief to Roland Berger Strategy Consultants (“Roland Berger” or “Firm”), an independent strategy consultancy firm based in Germany, in a letter issued to Bingham McCutchen partner, Amy Natterson Kroll.1 The Staff’s no-action letter (“Letter”) tackles, in part, the question of when U.S. broker-dealer registration is required if a non-U.S. firm is providing merger and acquisition (“M&A”) advice to non-U.S. clients where target companies may be located in the U.S. or be located outside the U.S. but have U.S. parent companies involved in decision making. The Letter follows on the heels of Rule 15a-6 FAQs issued in March 2013 (updated in April 2013) that provided updated guidance on the Rule 15a-6 exemption from broker-dealer registration for non-U.S. broker-dealers.2

Typically, a non-U.S. M&A advisor using U.S. mail or any other means or instrumentality of interstate commerce when engaged in M&A activity involving securities could be viewed as conducting a securities business within the United States, thus subjecting the advisor to the U.S. broker-dealer registration requirements. The Letter provides Roland Berger with the relief that the SEC staff will not recommend enforcement action if the Firm satisfies the conditions of the Letter when it engages in the described M&A activities on behalf of non-U.S. clients where U.S. targets (or non-U.S. targets with U.S. parent companies in decision-making roles) (“U.S. Targets”) are involved.

The Issue Upon Which Relief Was Requested

Roland Berger is a German firm that provides M&A advisory services to non-U.S. entities. These non-U.S. entities may include corporations and other entities domiciled outside the United States, including agencies or branches of U.S. entities permanently located outside the United States and, for the limited purposes of the Letter, bona fide divisions of a U.S. corporation (“Non-U.S. Clients”). From time-to-time, Roland Berger wishes to approach U.S. Targets to assess their interest in an M&A transaction with one of its Non-U.S. Clients. Because Roland Berger’s M&A advisory activities include advising in a cross-border context — causing it to use U.S. jurisdictional means for certain of its M&A engagements — it is possible that engaging in certain activities on behalf of Non-U.S. Clients could cause the Firm to be required to register as a “broker” as defined in Section 3(a)(4) of the Exchange Act.

Generally, in order to avoid being subject to U.S. broker-dealer registration, non-U.S. M&A advisors must find a way to comply with the exemption for foreign broker-dealers under Rule 15a-6 with regard to activities touching the United States. As noted in the letter requesting no-action relief, the application of Rule 15a-6 to M&A advisory activity has proven difficult for non-U.S. firms because the rule was drafted from the perspective of secondary market trading and does not easily conform to M&A activity. As a result, without no-action relief, in order to engage in the proposed M&A activity where there is a U.S. Target or U.S. jurisdictional means are used, Roland Berger described that:

“[It] would have to either (1) deal only with a registered broker-dealer (or U.S. bank acting in a broker-dealer capacity) acting on behalf of a U.S. Target pursuant to Rule 15a-6(a)(4)(i); or (2) enter into an agreement with a U.S. registered broker-dealer pursuant to Rule 15a-6(a)(3) under which the U.S. registered broker-dealer would assume certain responsibilities for the transaction.”

Roland Berger also noted in its letter that in many instances it is impractical for a U.S. Target to involve a U.S. broker-dealer, and in some instances U.S. Targets use internal personnel to advise on M&A transactions. As a result, applying the Rule 15a-6 framework frequently is difficult or not workable.

Relief Granted

The Staff’s Letter allows Roland Berger first, on behalf of its Non-U.S. Clients, to initiate contact directly with potential U.S. Targets in order to introduce a proposed M&A transaction. These direct contacts would include, for example, assessing the U.S. Target’s interest in a transaction, and making telephone calls or sending general pitch materials via email or postal mail into the United States.

In addition, the Staff’s Letter allows Roland Berger to engage in activities in the United States where either:

(1) Roland Berger interacts with a U.S. Target that is using internal or group level personnel with relevant M&A experience (via in-person meetings or through other direct contacts) to negotiate transaction, if (a) the internal or group level personnel described above are not associated with a U.S.-registered broker-dealer, and (b) the Roland Berger personnel engaged in any contacts with U.S. Targets in the United States are limited to persons whom Roland Berger would have determined satisfy the requirements for “foreign associated persons” in Rule 15a-6(a)(3)(ii)(B); or

(2) Roland Berger interacts with a U.S. Target that is using the services of an external advisor, such as a broker-dealer, attorney or other professional with relevant experience. (In this regard, Staff noted that anyone representing a U.S. Target would have its own, independent obligation to determine whether it is required to register as a broker-dealer.)

The Staff further conditioned its relief on Roland Berger agreeing that (1) it would not receive, acquire or hold funds or securities in connection with any transaction it engages in with a U.S. Target in reliance on the requested no-action relief; (2) it would not represent or advise the U.S. Targets in any regard with respect to the proposed transactions; and (3) the granting of the requested no-action relief would not relieve Roland Berger of any obligations it has to comply with the antifraud provisions of the U.S. securities laws (including, but not limited to, the Exchange Act).


The relief received by Roland Berger provides useful guidance regarding how non-U.S. advisors can conduct certain M&A advisory activity with a U.S. connection without limiting dealings to only U.S. broker-dealers under 15a-b(a)(4)(i); or attempting to fit within the awkward structure of an agreement with a registered broker-dealer pursuant to Rule 15a-6(a)(3). The Letter articulates a more workable structure for engaging in such activity and should assist both non-U.S. M&A advisors and U.S. broker-dealers to understand the circumstances under which a non-U.S. M&A advisor can, and cannot, engage in activities in the United States with U.S. Targets.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:


1 Letter from David W. Blass, Chief Counsel, Division of Trading and Markets, SEC to Amy Natterson Kroll, Esq., Bingham McCutchen LLP, Re: Roland Berger Strategy Consultants (May 28, 2013). Click here for a link to the no-action letter.

2 Click here to read the Rule 15a-6 FAQs.

This article was originally published by Bingham McCutchen LLP.