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Member, Beacon International Group, Ltd.
Under the Jumpstart Our Business Startups Act, certain research analysts no longer are prohibited from:
• Drafting, publishing and distributing research reports on an emerging-growth company for which their firm is brokering or assisting an initial public offering.
• Attending and participating in meetings between their bank's investment personnel and emerging-growth clients. Acceptable analyst conduct includes outlining for the client research program and factors considered during an analysis; asking for clarifications of factual statements made by the company's management; and, after a formal relationship be-tween the bank and the emerging-growth company has been established, participating in client presentations to the investment firm's sales force about the company.
• Publishing research during quiet periods prescribed under existing securities laws, including immediately after an IPO or the expiration of a lockup period.
In August, the U.S. Securities and Exchange Commission issued preliminary guidance outlining its interpretation of the JOBS Act research provisions' applicability to existing anti-fraud regulations and other securities laws. According to the SEC, investment firms and their analysts remain prohibited from:
• Changing research as a result of a communication in an effort to obtain investment banking business.
• Indicating to an emerging-growth company a willingness to exchange favorable research if the analyst's firm is selected for the IPO.
• Publishing reports that are inconsistent with an analyst's personal views about the company or its securities.
• Directing a research analyst to engage in sales or marketing efforts related to an investment banking services transaction.
Six months after President Barack Obama signed into law the Jumpstart Our Business Startups Act, mid-market investment banks are still waiting for guidance needed to set their compliance and insurance strategies.