Quick Answer
Research reports follow their own rules: quiet periods limit publication around offerings, selective early distribution to favored clients is prohibited, and third-party reports must be labeled. Independent third-party reports are exempt from content review and principal preapproval, but the firm cannot distribute research it knows or has reason to know is not objective or reliable.
These three rule sets (timing, distribution, and third-party sourcing) are tested separately, so treat each as its own checklist rather than one blended rule.
What Are Quiet Periods?
A quiet period restricts research analysts from publishing research reports about an issuer around the time of a securities offering. The purpose is to prevent research from being used as a marketing tool to hype the offering.
How Long Do Quiet Periods Last?
| Offering Type | Who Is Restricted | Quiet Period Duration |
|---|---|---|
| IPO | Any member that participated as an underwriter or dealer | 10 days after the offering |
| Secondary offering | Managers and co-managers | 3 days after the offering |
| Secondary offering | Other syndicate members | No quiet period |
These rules are codified in the research-analyst rule and represent a significant reduction from the older quiet periods (40 days after an IPO for managers and co-managers, and 10 days after a secondary offering).
Exam Tip: Gotchas
- Research report quiet periods for IPOs are 10 days (not the old 40-day rule). For secondary offerings, only 3 days for managers/co-managers, and no quiet period at all for other syndicate members. The exam tests the current, shorter timeframes.
- The manager test belongs to the secondary offering only. The 10-day IPO period covers any member that participated as an underwriter or dealer, not just the manager or co-manager.
When Do Quiet Period Exceptions Apply?
The quiet period does not prevent a member from publishing a research report if:
- The issuer is an Emerging Growth Company (EGC)
- The offering involves a covered investment fund
- Significant news or a significant event occurs that affects the issuer, and legal or compliance personnel authorize the publication before it is issued
- For a secondary offering specifically, the 3-day restriction does not block the routine research-continuation exemption for a company with actively traded securities, or a research analyst's public appearance about that company
How Must Research Reports Be Distributed?
Why Is Selective Distribution Prohibited?
- Research reports must not be selectively distributed to internal trading personnel or particular customers in advance of other entitled customers
- Firms must have written policies and procedures to prevent selective distribution
- The goal is to ensure a level playing field; no customer gets an unfair informational advantage
What Counts as Fair Access?
When a firm publishes research, all entitled clients should receive it at substantially the same time. Giving a research report to a hedge fund client hours before retail clients would violate the selective distribution prohibition.
Exam Tip: Gotchas
- Selective distribution is prohibited. All entitled clients must get research at substantially the same time. Giving one client early access is a violation, even if the delay is only hours.
What Rules Apply to Third-Party Research?
Broker-dealers sometimes distribute research produced by independent firms. Special rules apply:
An independent third-party research report comes from a provider with no affiliation or business or contractual relationship with the distributing firm or its affiliates reasonably likely to influence the research content. The provider makes content decisions without input from the firm or its affiliates. Posting a report on a website does not by itself make the report independent.
What Must Firms Do Before Distributing It?
- Third-party research reports must be clearly labeled as third-party research
- A registered principal or supervisory analyst must review and approve each non-independent third-party report by signature or initials before distribution. Independent third-party reports are exempt from this preapproval
- Firms may not distribute third-party research they know or have reason to know is not objective or reliable
- Firms must review third-party research to ensure it contains no untrue statements of material fact and no false or misleading information. An independent third-party report is exempt from this specific content review. The firm still may not distribute it if the firm knows or has reason to know the report is not objective or reliable, such as a report the firm knows materially misstates a fact
- Distributed third-party research must be accompanied by, or link to, the required material-conflict disclosure
When Does the Conflict-Disclosure Requirement Not Apply?
Independent third-party research is not considered "distributed" for purposes of the material-conflict-disclosure requirement only if it is:
- Made available upon customer request (the customer asked for it)
- Available through a member-maintained website (passive availability)
- Provided to a customer in connection with a solicited order where the representative informed the customer of the availability of independent research and the customer requests it
The delivery exception excuses only the material-conflict disclosure. Separately, independent status exempts the report from the specific content review and principal preapproval, even if the firm actively sends it. Labeling and the bar on distributing research the firm knows or has reason to know is not objective or reliable remain under either delivery method.
Exam Tip: Gotchas
- Independent status and delivery method answer different questions. Independent status excuses content review and principal preapproval. Website availability, a customer request, or the qualifying solicited-order request separately excuses material-conflict disclosure. Labeling and the objectivity-and-reliability restriction still apply.
- Firms must still review third-party research for accuracy before distributing it, even though they did not write it. The one exception is an independent third-party research report, which is exempt from that content review; the objectivity-and-reliability duty and the labeling duty still apply to it.
What Should You Check on Exam Day?
- Match the offering type (IPO vs. secondary) and role (manager/co-manager vs. other syndicate member) to the correct quiet period, or lack of one.
- Check for a quiet period exception: Emerging Growth Company issuer, covered investment fund, or a compliance-authorized significant-event report.
- Flag any early or favored access to research as a selective distribution violation, regardless of the delay's length.
- For independent third-party research, distinguish the content-review and preapproval exemptions from the separate material-conflict disclosure exception for website availability, customer requests, and qualifying solicited-order requests. An unsolicited email sending the report does not use the disclosure exception.
- Confirm a principal or supervisory analyst signed or initialed approval before non-independent third-party research went out. Independent reports still require labeling and remain subject to the objectivity-and-reliability restriction.