Rob Swystun, Pristine Advisers
The US Securities and Exchange Commission has recently approved the adoption of a slate of new rules later this month and in December meant to cut down on conflicts of interest in relation to the publication and distribution of equity research reports.
The most important changes that FINRA Rule 2241 will usher in — at least according to Jon Ogg of 24/7WallSt — is that investors are going to be able to get research reports after an initial public offering or a secondary offering much quicker than in the past.
Many of the new provisions of the rule, which will become effective in two parts on Sept. 25 and Dec. 24, deal with the aforementioned conflicts of interest, communications and other aspects of research departments’ affiliations with brokerage and investment banking operations.
The new rules slash the current 40-day quiet period after an IPO has been issued down to 25 days for firms in an underwriting group while the current 10-day quiet period after a secondary offering will be cut down to just three days.
During these quiet periods, any member of an underwriting group cannot publish or distribute research reports and research analysts cannot make public appearances relating to the IPO issuer or, in the case of a secondary offering, if they’ve acted as a manager or co-manager of that offering.
FINRA interprets the date of the offering to be the later of the effective date of the registration statement or the first date on which the securities were bona fide offered to the public.
The new rules maintain exceptions to these mandated quiet periods for companies with actively-traded securities and eliminates the current quiet period of 15 days before and after the expiration, waiver or termination of a lock-up agreement.
What matters most is how the new rules are going to affect hot IPOs and big secondary offerings, Ogg says, as Wall Street analysts will be making research calls much sooner than in the past.