4.1.10.1. Research Reports
SEC rules also govern the content of research reports before, during, and after an offering. A research report is a written communication that includes information, analysis, and/or recommendations on a security. A research report can be acceptable during the registration period if the company is a reporting company under the Securities Act of 1934, and if the researcher regularly reports on the issuer as part of his business and the report falls under one of these rules:
• Rule 137 applies to research reports by non-participating broker-dealers. Under Rule 137, broker-dealers that are not participating in the offering may recommend the offering in a research report as long as the report about the issuer is part of their regular business. Additionally, the author of the report cannot receive or act under any direct or indirect understanding with the issuer or any participant in the distribution.
• Rule 138 applies to research reports by participating broker-dealers about the issuer’s other securities. Under Rule 138, participating broker-dealers may write research reports about an issuer’s securities if the securities in the report do not involve the security that is being offered. However, the issuer must file reports with the SEC and must be up to date on its filings over the past 12 months. In addition, the research reports must be done in the regular course of business.
• Rule 139 and 139b apply to research reports by participating broker-dealers about the security being offered or its issuer. Under Rule 139, participating broker-dealers may write research reports about an issuer’s securities offering if the issuer is a WKSI or seasoned issuer, has a public float of at least $75 million, is eligible to file a Form S-3, is offering investment-grade securities, and has filed all periodic reports required during the preceding 12 months. Additionally, a broker-dealer is permitted to write a research report about