October 22, 2012

FINRA Proposes Rule Changes in Connection with JOBS Act

Holland & Knight Bulletin
Eric S. Almon

The Financial Industry Regulatory Authority, Inc. (FINRA) (f/k/a National Association of Securities Dealers, Inc. (NASD)) filed with the SEC proposed rule changes intended to conform to certain requirements of the JOBS Act, as further interpreted by the SEC staff. In its proposal, FINRA stated that the proposed changes are consistent with the SEC staff's position, as expressed in FAQs, and would further the policies underlying the applicable JOBS Act provisions.

The proposed rule changes would amend NASD Rule 2771(c)(4) to allow research analysts to attend pitch meetings to an emerging growth company (EGC) that are also attended by investment bankers in connection with an initial public offering (IPO), but only so long as they do not engage in prohibited conduct in such meetings, such as soliciting investment banking business. New York Stock Exchange (NYSE) Rule 472 would also contain conforming changes.

The proposed rule changes would also eliminate the following FINRA research quiet period restrictions in connection with an IPO and secondary offerings by an EGC:

  • NASD Rule 2711(f)(1)(A), which imposes a 40-day quiet period following an IPO for a FINRA member that acts as a manager or co-manager
  • NASD Rule 2711(f)(1)(B), which imposes a 10-day quiet period following a secondary offering for a FINRA member that acts as a manager or co-manager
  • NASD Rule 2711(f)(2), which imposes a 25-day quiet period following an IPO for a FINRA member that acts as an underwriter or dealer (other than as a manager or co-manager)
  • NASD Rule 2711(f)(4), which imposes a 15-day quiet period prior to and after the date of the expiration, waiver or termination of a lock-up agreement.

Once again, NYSE Rule 472 would contain conforming changes.

FINRA requested that the proposed rule changes, other than the elimination of the quiet periods for secondary offerings and after the expiration, termination or waiver of a lock-up agreement, be retroactively effective to April 5, 2012, the date on which the applicable provisions of the JOBS Act became effective.

See: http://www.finra.org/web/groups/industry/@ip/@reg/@rulfil/documents/rulefilings

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