Most notably, our updated rulemaking proposal incorporates a new rule exemption referred to as "Intermediaries in Small Business Sale Transactions." This proposed rule embodies the concepts articulated in the SEC's no-action letter to Country Business, Inc., dated November 8, 2006 ("CBI Letter"). The fact pattern reflected in the CBI letter is common for many small business brokers. We believe its guidance should be codified into an exemption that can be more easily understood by intermediaries, legal counsel, and the public. Moreover, we believe it is equally important and in the public interest for the states to address the same exemption under their laws, so a similar exemption has been incorporated into the revised model state rules proposal.

The other revisions to the M&A broker rule are straightforward. We have deleted from the proposed SEC rule the initial request for an exemption from registration and related regulation as an "investment adviser," in response to comments from the SEC's Division of Investment Management. Instead, we propose to rely upon the "broker" exemption contained in the Investment Adviser's Act of 1940. This also recognizes that SEC registration as an investment adviser would be prohibited in most cases because the intermediary has no "assets under management." We do continue to request this exemptive relief from state-level investment adviser registration and regulation where, in some circumstances, registration might otherwise be required because the activities do not fit within the "broker" exemption under state securities laws.

In both the SEC and state versions of the rules we have also clarified the concept of a "modified agency capacity" for the intermediary. This reflects our understanding that some state laws already recognize a modified principal-agency relationship where the intermediary does not act as an agent for either the seller or the buyer in a business sale transaction. We do not intend to create any new principal-agency relationships by these rules, merely to reflect the fact that some states' real estate brokerage laws have already allow for these modifications to a traditional principal-agent relationship.

Attached to this message are the following PDF files:

* Proposed SEC Rules for M&A Brokers and Small Business Sales 3-20-08 Final.pdf -- this is a clean copy of the revised SEC rule proposals.

* Proposed SEC Rules for M&A Brokers and Small Business Sales 3-20-08 Fully Marked.pdf -- this is a marked copy of the revised SEC rule proposals. This highlights all of the changes from the initial proposals dated September 19, 2007.

* Proposed Model State Rules for M&A Brokers and Small Business Sales

3-20-08 Final.pdf -- this is a clean copy of the revised model state rule proposals.

* Proposed Model State Rules for M&A Brokers and Small Business Sales

3-20-08 Fully Marked.pdf -- this is a marked copy of the revised SEC rule proposals. This highlights all of the changes from the initial proposal dated September 19, 2007.

Hugh and I will be in Washington D.C. for the NASAA Spring Public Policy Conference on April 1, 2008, and would welcome the opportunity to get together with you, as well as NASAA's Project Group, to discuss the revised proposals and how best to coordinate and advance them at both the SEC and NASAA. Let me know if, perhaps, an afternoon meeting on April 1st (after the SEC-NASAA meeting) at the conference hotel would work for you.