The Investment Industry Regulatory Organization of Canada (IIROC) is following the lead of U.S. authorities and reducing the quiet periods that apply to equity research to 10 days from 40 days following an initial public offering (IPO) and to three days from 10 days for secondary offerings.
IIROC’s amendments, which are to be implemented immediately effective Sept. 25, aim to ensure there’s a level playing field between Canada and the U.S. in disseminating research reports.
The existing limits are designed to prevent broker-dealers from rewarding an issuer with favourable research coverage improperly in the immediate aftermath of an offering. IIROC’s rules were modelled on the U.S. rules in this area.
However, the Financial Industry Regulatory Authority (FINRA) is reducing the quiet periods that it imposes, IIROC’s notice says: “U.S. regulators have recognized the importance of timely dissemination of information and concluded that a shorter quiet period would not disadvantage investors. Instead, they note the cost to investors when they are deprived of information and analysis during quiet periods.”
So, IIROC is seeking to follow suit by harmonizing the quiet period with the U.S., which “would preserve Canadian investor participation in cross-border transactions, and that a uniform quiet period for domestic Canadian offerings is equally appropriate,” the notice says.
The Ontario Securities Commission (OSC) approved the proposed changes for immediate implementation.