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SEC and FINRA Amend Rule 2711Article Summary: SEC and FINRA Amend Rule 2711
Copyright (c) 2013 Brenda Hamilton, Attorney
On April 5, 2012, the Jumpstart Our Business Startups Act ("JOBS Act") was signed into law. Its aim is to facilitate capital formation for "emerging growth companies" by improving information flow to investors. On October 11, 2012, the SEC granted accelerated approval to FINRA proposals amending Rule 2711 which governs research analysts and research reports to conform with the provisions of the JOBS Act. It also makes changes to quiet period restrictions consistent with the policies underlying the Act.
The proposed rule also amends NYSE Rule 472 concerning communications to the public. Section [url=http://www.mnfruit.com/doudounemoncler.php]moncler pas cher[/url] 105(b) of the JOBS Act amended Section 15D of the Act to prohibit the SEC or any national securities association from adopting or maintaining any rule or regulation in connection with an initial public offering ("IPO") of an Emerging Growth Company that:
i. restricts, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between an analyst and a potential investor; or
ii. restricts a securities analyst from participating in any communication with [url=http://www.mquin.com/gzparis.php]giuseppe zanotti sneakers[/url] the management of an Emerging Growth Company that is also attended by any other associated person of a broker, [url=http://www.rtnagel.com/airjordan.php]jordan pas cher[/url] dealer, or member of a national securities association whose functional role is other than as a securities analyst.
iii. Section 105(d) further prohibits the SEC or any national securities association from adopting [url=http://wheresamericasjobs.com/index.php?option=com_kunena&func=view&catid=15&id=749395&Itemid=55#749433]jordan pas cher Online Hotel Reservation For Best Hotels in India - written by jon kouback[/url] or maintaining any rule or regulation that prohibits a broker or dealer from publishing or distributing any research report or making a public appearance, with respect to the securities of an Emerging Growth Company either:
i. within any prescribed period of time following the IPO date of the Emerging Growth Company; or
ii. within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its shareholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its shareholders after the IPO date.
The Amendments
On August 22, 2012, the SEC's Division of Trading and Markets provided guidance on these provisions in the form of Frequently Asked Questions ("FAQs"). FINRA proposed amendments to the applicable provisions of [url=http://www.thehygienerevolution.com/barbourparis.php]barbour paris[/url] NASD Rule 2711 to conform with the JOBS Act and SEC staff guidance with regard to the applicable JOBS Act provisions.
Arranging and Participating in Communications
NASD Rule 2711(c)(4) prohibits a research analyst from participating "in efforts to solicit investment banking business," including any "pitches" for investment banking business or other communications with companies for the purpose of soliciting investment banking business. The SEC interpreted the JOBS Act to provide that research analysts will be allowed to attend meetings with issuer management in connection with the IPO of an emerging growth company. These events, which include pitch meetings, [url=http://www.mxitcms.com/tiffany/]tiffany[/url] may also be investment banking personnel. Attending analysts and bankers must not "engage in otherwise prohibited conduct in such meetings"; that conduct includes "efforts to solicit investment banking business". The SEC further explains that a research analyst who attend a pitch meeting "could, for example, introduce themselves, outline their research program and the types of factors that the analyst [url=http://www.thehygienerevolution.com/barbourparis.php]barbour[/url] would consider in his or her analysis of a company, and ask follow-up questions to better understand a factual statement made by an emerging growth company's management." Accordingly, the proposed rule change creates an [url=http://zmder.xhycar.com/forum.php?mod=viewthread&tid=2021508&pid=2883008&page=40&extra=#pid2883008]abercrombie soldes Colombo a Land of Fascinating B[/url] exception to NASD Rule 2711(c)(4).
The SEC's interpretation also establishes that under Section 105(b) of the [url=http://www.ilyav.com/uggsoldes.php]boots ugg pas cher[/url] JOBS Act, an associated person of a broker-dealer, including investment banking personnel, may arrange communications between research analysts and investors in connection with the IPO of an emerging growth company. As an example, the FAQs state that an investment banker could forward a list of clients to a research analyst whom the analyst could, "at his or her own discretion and with appropriate controls, contact." The FAQs acknowledge that FINRA does not have a rule that directly prohibits this activity and further states that such activity, in itself, would not constitute conduct by investment banking personnel to directly or indirectly direct a research analyst to engage in sales or marketing efforts related to an investment banking services transaction in violation of NASD Rule 2711(c)(6). Accordingly, the SEC confirmed that the JOBS Act requires no conforming rule change.
Quiet Periods
Section 105(d) of [url=http://www.jordanpascherofficiele.com]air jordan pas cher[/url] the JOBS Act expressly permits publication of research and public appearances with respect to the securities of an emerging growth company any time after its IPO of an emerging growth company or prior to the expiration of any lock up agreement. While the [url=http://www.mnfruit.com/doudounemoncler.php]moncler[/url] JOBS Act refers only to the "expiration" of a lock-up agreement, the FAQs note SEC staff belief that Congress intended for the JOBS Act provisions to apply equally to the period before a "waiver" or "termination" of a lock-up agreement.
As such, in accordance with SEC staff guidance on this JOBS Act provision, the proposed rule change amends NASD Rule 2711 to eliminate the following quiet periods with respect to an IPO of an Emerging Growth Company:i. NASD Rule 2711(f)(1)(A), which imposes a 40-day quiet period after an IPO on a member that acts as a manager or co-manager of such IPO;ii. NASD Rule 2711(f)(2),which imposes a 25-day quiet period after an IPO on [url=http://www.gotprintsigns.com/abercrombiepascher/‎]abercrombie soldes[/url] a member that participates [url=http://www.sandvikfw.net/shopuk.php]hollister sale[/url] as an underwriter or dealer (other than manager or co-manager) of such an IPO; andiii.NASD Rule 2711(f)(4) with respect to the 15-day quiet period applicable to IPO managers and co-managers prior to the expiration, waiver, or termination of a lock-up agreement or any other agreement that such member has entered into with a subject company or its shareholders that restricts or prohibits the sale of securities held by the subject company or its shareholders after the completion of an IPO.The SEC noted that the JOBS Act makes no reference to quiet periods after a secondary offering or during a period of time after expiration, termination, or waiver of a lock-up agreement. Accordingly, the SEC's note that NASD Rule 2711(f)(1)(B) imposes a 10-day quiet period on managers and co-managers following a secondary offering, and the remaining portion of NASD Rule 2711(f)(4) relating to quiet periods after [url=http://www.gotprintsigns.com/abercrombiepascher/‎]abercrombie pas cher[/url] the expiration, termination or waiver of a lock up agreement, remain fully in effect.

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