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← Series 79: Underwriting & New Financing
Series 79 practice questionhardFree Writing Prospectus

An emerging growth company (EGC) conducting an IPO wants to share a research report written by the lead underwriter's analyst with institutional investors during the waiting period. Is this permitted?

  1. ANo, research by participating underwriters is always prohibited during the waiting period
  2. BYes; EGC IPO research reports by participating underwriters are not treated as prospectuses or FWPs✓ Correct answer
  3. COnly if the research report has been filed with the SEC
  4. DOnly if the research report does not include a price target
Explanation

Why B — Yes; EGC IPO research reports by participating underwriters are not treated as prospectuses or FWPs

Section 105(a) of the JOBS Act provides that a research report published by a broker-dealer about an emerging growth company that is the subject of a proposed public offering shall not be deemed an offer under Section 2(a)(10) or Section 5(c) of the Securities Act, even if the broker-dealer is participating in the offering. This provision was designed to provide institutional investors with additional analytical perspectives on EGC IPOs. However, the research must comply with FINRA's research rules and the analyst must be independent of the investment banking function under the Global Research Settlement principles.

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