On November 30th, the SEC adopted rules and amendments designed to promote research on mutual funds, exchange-traded funds, business development companies, and similar covered investment funds. The SEC enacted these changes in accordance with the mandate in the Fair Access to Investment Research (FAIR) Act of 2017. The new rules will reduce obstacles in providing fund research by harmonizing its treatment with other research on public companies and generally establish a safe harbor for a broker or dealer to publish and/or distribute research reports on investment funds under certain conditions.
Within this safe harbor, the publication or distribution of a covered investment fund research report would be deemed not to be an offer for sale or offer to sell the covered investment fund’s securities for the purposes of sections 2(a)(10) and 5(c) of the Securities Act of 1933. The SEC is also adopting a new rule under the Investment Company Act of 1940 to exclude a covered investment fund research report from the coverage of section 24(b) of the Investment Company Act, except to the extent that the report is otherwise not subject to the content standards in self-regulatory organization rules related to research reports. Amendments to rule 101 of Regulation M and a technical change to Form 12b-25 were also adopted.
Rule 101 provides an exception for research activities that satisfy the conditions of Securities Act rule 138 or rule 139. The SEC's conforming amendment to rule 101 expands this exception to include research activities that satisfy the conditions of rule 139b.
The technical amendment to Form 12b-25 replaces references to Form N-SAR with references to Form N-CEN. It also removes the checkbox and accompanying text related to transition reports on Form N-SAR.
The changes become effective thirty days after the amendments’ publication in the Federal Register.
Sources:
SEC Adopts FAIR Act Rules Promoting Research Reports on Investment Funds (www.sec.gov)
Covered Investment Fund Research Reports (www.sec.gov)
SEC Proposes FAIR Act Rules to Promote Research Reports on Investment Funds (www.novaworkssoftware.com)
