10.2. Publishing Research Reports During Securities Offerings

If a broker-dealer publishes a research report while the subject company is conducting or preparing to conduct a securities offering, then the report must fall into one of the below categories. Otherwise, the SEC could consider the report to be an offer to sell the securities, which opens up the publisher to being found in violation of the Securities Act.

Because a publisher can protect itself by making sure its research reports fall into one of the below categories, they are called safe harbors. A safe harbor is a set of concrete requirements that provide a clear path to avoid violating a broadly worded law or regulation.

The following safe harbors do not remove the need to comply with FINRA’s rules about quiet periods. They only protect against the research report being considered an impermissible offer to sell. These safe harbors may be used whether the offering is in its pre-filing, cooling-off, or post-effective period.

• Non-Participating Broker-Dealer. A broker-dealer can publish a research report about the securities if it isn’t participating in the offering, has no plans to participate, and isn’t being paid by the issuer or any participant. (This requirement does not preclude payment of the regular price for independent research or payment of the regular subscription or purchase price for a research report.) The issuer cannot have been a blank check company (such as a SPAC), shell company, or penny stock issuer within the previous three years. The research report must be published in the normal cours