Davis Polk & Wardwell Newsflash

FINRA Proposes Changes to Research Quiet Period

October 20, 2008

FINRA has issued and is requesting comment on Proposed Research Registration and Conflict of Interest Rules. The proposed rules would replace the existing NYSE and NASD Rules governing research analyst conflicts of interest and would also supersede the proposed changes to those rules published by the SEC in January 2007.

Significantly, the proposed rules would shorten, and in some cases eliminate, the "quiet period" during which a member firm participating in an offering cannot publish or distribute research reports about the issuer, and the firm's research analyst cannot make public appearances relating to the issuer.

Under current rules, the quiet period is

  • 40 days following the date of the initial public offering for lead underwriters and 25 days after the offering for other underwriters or dealers;
  • 10 days following a follow-on offering; and
  • 15 days before and after expiration, waiver or termination of a lock-up agreement.

Under the proposed rules, the quiet period would be limited to a single 10-day period following an IPO. Follow-on offerings and lock-up expirations, waivers and terminations would no longer trigger a quiet period. Note that the 25-day prospectus delivery period for an IPO may lead to all underwriters continuing to maintain a 25-day quiet period.

FINRA is requesting comment on the proposed rules by November 14, 2008. If, after receiving comment, FINRA determines to proceed with the proposed rules, it would need to file them with the SEC for approval. The SEC would publish the proposed rules in the Federal Register and subject them to an additional public comment period.

If you have any questions regarding this newsflash, please call your Davis Polk contact.

Davis Polk & Wardwell