primarily reflecting a Congressional intent to allow research personnel to participate in EGC management presentations with sales force personnel so that the issuer’s management would not need to make separate and duplicative presentations to research personnel at a time when resources of the EGC may be limited. The SEC stated in the SEC FAQs that research personnel must limit their participation in such meetings to introducing themselves, outlining their research programme and the types of factors that they would consider in their analysis of a company, and asking follow- up questions to better understand a factual statement made by the EGC’s management. In addition, after the firm is formally retained to underwrite the offering, research personnel could, for example, participate in presentations by the management of an EGC to educate a firm’s sales force about the company and discuss industry trends, provide information obtained from investing customers, and communicate their views.26 In their October 11 2012 amendments (which became
effective retroactive to April 5 2012, the date the JOBS Act was enacted), Finra amended Rule 2711(c)(4) to conform to the provisions of the JOBS Act, specifically to provide that, while research analysts are prohibited from soliciting business for investment banking, they are not prevented from attending a pitch meeting in connection with an initial public offering of an EGC that is also attended by investment banking personnel; provided, however, that a research analyst may not engage in otherwise prohibited conduct in such meetings.27 In the SEC’s view, section 105(b)(2) of the JOBS Act
allows a firm to avoid the ministerial burdens of organising separate and potentially duplicative meetings and presentations among an EGC’s management team, investment banking personnel, and research analysts. Section 105(b)(2) did not address communications where investors are present together with company management, analysts and investment banking personnel. Therefore, the SEC has taken the view that this provision of the JOBS Act does not affect the SRO rules prohibiting analysts from participating in road shows or otherwise engaging in communications with customers about an investment banking transaction in the presence of investment bankers or the company’s management. These rules apply to communications with customers and other investors and do not depend on whether analysts, investment bankers, and management are participating jointly in such communications.28 The FAQs confirm that Regulation AC is not affected by the JOBS Act.
70 JOBS Act Quick Start
Quiet periods A broker-dealer participating in an issuer’s IPO is generally subject to certain blackout periods with respect to publishing of research reports about such issuer. The publication of research is prohibited in advance of the IPO and, once the IPO has priced, no research can be published until 40 days following the offering. Additionally, the publication of any research must be suspended for the 15 days before and after the release or expiration of any lock- up agreement. The JOBS Act now prohibits any national securities
association (which includes Finra) or the SEC from adopting any rule or regulation prohibiting a broker-dealer from publishing or distributing a research report or making a public appearance with respect to the securities of an EGC within any prescribed period of time following the EGC’s IPO or the expiration date of any lock-up agreement. This eliminates the traditional post-IPO quiet period for EGCs. On October 11 2012, the SEC granted accelerated
approval for amendments to the SRO rules, effective immediately, that conform to the requirements of the JOBS Act related to research analysts and research reports in certain offerings by EGCs. In addition, the amendments eliminated the quiet periods in connection with IPOs and secondary offerings of EGCs by the adoption of new Finra Rule 2711(5), which states that the lock up periods discussed in paragraphs (f )(1), (f )(2) and (f )(4) of Finra Rule 2711, “shall not apply to the publication or distribution of a research report or a public appearance following an initial public offering or secondary offering of the securities of an Emerging Growth
Company” (see
http://www.sec.gov/rules/sro/finra/2012/34-68037.pdf). The JOBS Act also did not explicitly permit publication
or distribution of a research report relating to an EGC after the expiration, termination, or waiver of a lock-up agreement or prohibit quiet periods after a follow-on offering of an EGC’s securities. The adoption of the amendments to the SRO Rules have made clear that both the SEC and Finra interpret the JOBS Act to apply equally to permit publication of research reports on an EGC’s securities, no matter how the lock-up period ends – by termination, expiration, or waiver – both before and after the termination, expiration, or waiver of the agreement, eliminating all quiet periods for EGCs. Section 105(d) of the JOBS Act provides that neither an
SRO nor the SEC may adopt or maintain any rule or regulation prohibiting a broker-dealer from publishing or distributing a research report or making a public appearance with respect to the securities of an EGC
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