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SEC Floats Plan to Allow BDs to Release Research Reports on Funds, ETFs

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The Securities and Exchange Commission on Wednesday proposed rules and amendments to promote research on mutual funds, exchange‑traded funds, registered closed-end funds, business development companies and similar covered investment funds to comply with the mandate set forth in the Fair Access to Investment Research (FAIR) Act of 2017.

The bill, which passed the House last May, directs the SEC to establish and implement a “safe harbor” for certain investment fund research reports published by brokers and dealers.

“Such reports shall be deemed not to be ‘offers’ under specified provisions of securities law, even if the broker or dealer participates in the registered offering of the investment fund’s securities,” the agency states.

“The proposed changes are intended to provide investors with greater access to research to aid them in making investment decisions,” said SEC Chairman Jay Clayton, in a Wednesday statement. “This congressional mandate recognizes the critical role that mutual funds and similar investment products play in helping Main Street investors meet their financial goals.”

In implementing the safe harbor, the SEC must prohibit a self-regulatory organization from maintaining or enforcing a rule that would prevent a member from:

  • publishing or distributing a covered investment fund research report solely because the member is also participating in a registered offering of the fund, or
  • participating in a registered offering of a covered investment fund solely because the member has published a research report about the fund.

The bill restricts the SEC from conditioning the safe harbor upon specified requirements.

If adopted, the proposal would generally establish a safe harbor for a broker or dealer to publish or distribute research reports on investment funds under certain conditions.

The proposal is out for a 30-day comment period.

— Check out Rep. Hensarling’s ‘JOBS 3.0′ Swan Song on ThinkAdvisor.


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