Chapter Nine
The Post-Effective Period
Although the effective date and the formal start of the offering typically take place very close together (except in a delayed offering), they are not the same thing. The final price is negotiated by the lead underwriter and issuer at a pricing call, and trading will customarily begin the following day.
The start date of an IPO or secondary offering is also the start of a quiet period imposed by FINRA, during which the underwriter’s research analysts may not publish research reports about the issuer, or make any public appearances related to the issuer. (Do not confuse this with the cooling-off period, which is also sometimes referred to by the term “quiet period.”) For IPOs, the quiet period lasts for 10 calendar days and applies to analysts working for any distribution participant. For other offerings, the quiet period lasts for 3 calendar days and applies only to analysts working for a firm that acted as a manager or co-manager. FINRA allows four exceptions:
1. There is no quiet period if the issuer is an EGC.
or
2. There is no quiet period if the issuer is an investment company that has been a reporting issuer for 12 months, the issuer kept current in its reporting during that time, and the analyst’s employer is not the issuer’s affiliate or investment adviser.
or
3. If a research report or public appearance is relevant to “the effects of significant news or a significant event on the subject company,” then the report may be released or the appearance made before the end of the quiet period.
or
4. There is no quiet period for research reports if the offering is a follow-on offering of an actively traded security and the research report meets the standards for safe harbor under SEC Rule 139. The most common cases of safe harbor under Rule 139 include the issuer being a WKSI or seasoned issuer, or the report being about the issuer’s industry in general. Note that meeting the standard