Congressman Garrett recently renewed discussions regarding additional individual legislative initiatives or other proposals relating to promoting capital formation that might well be grouped together into a single “JOBS Act 2.0” measure.  These matters had been scheduled (prior to the shutdown) to be considered at a hearing on October 9, 2013.

Commentators have noted that the IPO on-ramp alone cannot be expected to revitalize the U.S. IPO market, especially the market for offerings by smaller companies.  Various measures have been suggested, including addressing tick sizes, reviewing disclosure requirements for registration statements, leveling further the information playing field as between retail and institutional investors, and taking additional steps to encourage additional research coverage.

For smaller public companies that completed their IPOs prior to the JOBS Act enactment, additional disclosure and corporate governance accommodations may be appropriate.  Various groups also have urged the Securities & Exchange Commission to review the thresholds for the designation of entities as smaller reporting companies and accelerated filers.  Before the JOBS Act, the Commission had committed to reviewing existing communications safe harbors.  Given technological advancements, IPO communications restrictions (such as the quiet period), and offering related communications may benefit from revamping.  The 2005 Securities Offering Reform changes were principally focused on the largest, most sophisticated issuers, but many of those measures could be applied to a broader group of companies.  In addition, modernizing the regulations applicable to business development companies, along the lines contemplated by legislation already introduced in Congress, would facilitate capital formation for BDCs.

FINRA has filed with the SEC a proposed rule change to amend FINRA’s rules relating to research in order to bring them in line with the JOBS Act and the SEC Staff’s FAQs addressing research.  The proposed FINRA rule change would modify NASD Rule 2711 and NYSE Rule 472.

Arranging and Participating in Communications:  The proposed rule creates an exception to Rule 2711(c)(4) that permits research analysts to attend meetings with issuer management that are also attended by investment banking personnel, including pitch meetings, provided that the research analysts do not engage in any prohibited conduct, such as soliciting investment banking business.  Rule 472 also would contain a similar exception.

Quiet Periods:  The proposed rule amends NASD 2711 to eliminate the following quiet periods with respect to an IPO of an EGC:  NASD Rule 2711(f)(1)(A) which imposes a 40-day quiet period after an IPO on a member that acts as a manager or co-manager of the IPO; NASD Rule 2711(f)(2) which imposes a 25-day quiet period after an IPO on a member that participates as an underwriter or dealer (other than manager or co-manager) of the IPO; and NASD Rule 2711(f)(4) with respect to the 15-day quiet period applicable to IPO managers and co-managers prior to the expiration, waiver or termination of a lock-up agreement.

FINRA also proposes to adopt changes to NASD Rule 2711(f)(4) to eliminate the 10-day quiet period on managers and co-managers following a secondary offering and the quiet periods after the expiration, waiver or termination of a lock-up agreement for such an offering.