Introduction
In the recent editions of Exempt Market Update, in the
articles Engagement Letter Best Practices – Part One and Part
Two, we focused on two topical features of an EMD’s engagement
letter: exclusivity and fee-tails. In this edition we consider an often
overlooked, but critical aspect of the regulatory environment in
which EMDs operate – the broker licensing requirement under
the Real Estate and Business Brokers Act (Ontario)(REBBA
or the Act). This requirement can certainly have an impact on
In the recent editions of Exempt Market Update, in the articles
Engagement Letter Best Practices – Part One and Part Two, we
focused on two topical features of an EMD’s engagement letter:
exclusivity and fee-tails. In this edition we consider an often
overlooked, but critical aspect of the regulatory environment in
which EMDs operate – the broker licensing requirement under
the Real Estate and Business Brokers Act (Ontario) [emphasis
added] (REBBA or the Act). This requirement can certainly have
an impact on drafting an engagement letter, as well as much
wider implications for the offering of M&A advisory services in the
province of Ontario.
Business Landscape
EMD’s often engage in a dual business model of raising
funding for issuers (whether involved in the real property sector
or otherwise) and providing M&A advisory services to purchasers
of businesses and potential acquisition targets. Alternatively,
a sub-set of firms have adopted a single-focus service model
of providing advice only in respect of the purchase and sale of
businesses – these firms, provided they do not engage in capital-raising activities, are largely not required to register as EMDs
under securities laws. A little more on that later.
Regardless of your service model, given the exceedingly
broad drafting of certain operative definitions in REBBA, both
EMDs engaged to raise capital for issuers operating in the real
property sector (for ease we’ll call these ‘capital-raisers’), and
those offering advisory services to clients in the M&A context
in any sector (we’ll call these ‘M&A advisors’, along with their
non-EMD-registered competitors), in either case without the
benefit of a REBBA brokerage license, should be cognizant of
their regulatory and financial exposure under the Act.
The question is: what are the risks, and what can be done
about them?
M&A Advisor as Real Estate Broker – Legislation and
Consequences
Few M&A advisors presently take concrete steps to mitigate
the risk that the services they provide or have provided could be
By David S. Brown , Partner, WeirFoulds LLP
Daniel McGruder, Associate, WeirFoulds LLP
PROTECT YOUR SUCCESS FEES!
REAL ESTATE LICENSING
considerations for EMDs
