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?
- ANo, research by participating underwriters is always prohibited during the waiting period
- BYes, the JOBS Act permits emerging growth companies' IPOs to be accompanied by research reports from participating underwriters without the report being treated as a prospectus or free writing prospectus✓ Correct answer
- COnly if the research report has been filed with the SEC
- DOnly if the research report does not include a price target
Why B — Yes, the JOBS Act permits emerging growth companies' IPOs to be accompanied by research reports from participating underwriters without the report being treated as a prospectus or free writing prospectus
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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