On May 23, 2018, the Securities and Exchange Commission (the “Commission”) proposed establishing a research report safe harbor (Rule 139b) for unaffiliated brokers or dealers that publish or distribute research reports that cover investment funds. The Commission took this action in furtherance of the mandate of the Fair Access to Investment Research Act of 2017 (the “FAIR Act”). The FAIR Act required the Commission to expand the Rule 139 safe harbor for research reports to cover research reports on investment funds. Rule 139 permits a broker or dealer that is distributing an issuer’s securities to publish a research report about those securities without the report itself being deemed an offer to sell such securities. If adopted as proposed, the safe harbor would be made available to research reports on mutual funds, exchange-traded funds, registered closed-end funds, business development companies and similar covered investment funds. The safe harbor would be unavailable with respect to broker-dealers’ publication or distribution of research reports about closed-end registered investment companies or business development companies during their first year of operation. The adoption of an expanded safe harbor would reduce obstacles that currently prevent certain investors from accessing research reports on investment funds. However, the safe harbor would not extend to research reports issued by brokers or dealers affiliated with the investment fund. The public comment period will remain open for 30 days. The proposed rule is available here.
