HB 3672 amends Section 2(a)(3) of the Securities Act of 1933 (15 U.S.C. 77b(a)(3)) by replacing the phrase "an emerging growth company" with "an issuer," changing "the common equity" to "any," and substituting "such emerging growth company" with "such issuer." The statutory change is narrowly textual but broad in effect: it removes the current limitation that the research-report exception applies only to emerging growth companies' common equity and extends the exception to reports about any issuer and any class of securities when that issuer undertakes a proposed offering of public securities.
That expansion will matter to compliance officers, broker-dealers, securities analysts, underwriters, and issuers because it recalibrates what third‑party and dealer research may be distributed without constituting an "offer" under the Securities Act. Practically, the amendment can make it easier to publish analyst coverage around public offerings (including IPOs, follow-ons, and other securities classes), raising issues about conflicts of interest, quiet‑period practices, and how existing FINRA and SEC rules interact with the new statutory language.
At a Glance
What It Does
The bill edits three phrases in 15 U.S.C. 77b(a)(3) to expand the research-report exception from being tied to "emerging growth company" and "the common equity" to applying to any "issuer" and "any" security. The exception will therefore cover research reports about any issuer that is engaged in a proposed offering of public securities.
Who It Affects
Primary stakeholders include sell‑side research teams, broker‑dealers, underwriters, issuers conducting public offerings, compliance legal teams, and regulators who oversee disclosure and market‑conduct rules. Secondary market investors and institutional asset managers will see changes in the flow and timing of research during offerings.
Why It Matters
By widening the exception, the bill loosens one constraint on pre‑offering communications: more analyst reports can be published without being treated as offers that trigger registration requirements. That alters the compliance calculus for quiet periods, conflicts‑of‑interest controls, and coordination between issuers, underwriters, and research producers.
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What This Bill Actually Does
At present, Section 2(a)(3) of the Securities Act provides a narrow research‑report exception that is tied to emerging growth companies and, historically, has been read to cover certain analyst reports about common equity in the context of offerings. HB 3672 makes a focused, textual change: it replaces the statute’s references to an "emerging growth company" with "an issuer" and expands "the common equity" to "any" security.
On its face that means the statutory protection that prevents certain research reports from being treated as an "offer" is no longer limited by issuer type or by security class.
Because the amendment is textual rather than programmatic, it does not add new compliance procedures or create rulemaking duties for the SEC; instead, it changes the baseline legal analysis used to determine whether a research product is an "offer" under the Securities Act. That will change how firms evaluate whether publishing a report during a pending offering could expose them to registration or prospectus‑delivery obligations.
Firms that previously restricted analyst commentary around IPOs or follow‑ons because the exception applied only to emerging growth companies will need to reassess whether their internal quiet‑period policies remain necessary or prudent.The change does not, by its wording, alter the securities laws’ antifraud provisions or other statutory obligations such as registration or prospectus liability for materially false or misleading statements. Analysts and firms remain subject to anti‑fraud rules in Section 11, Section 12(a)(2), Rule 10b‑5, and applicable FINRA standards.
Where the amendment will produce ambiguity is in interaction with agency rules and self‑regulatory standards—particularly FINRA’s rules on research communications and underwriter quiet‑periods—and in how courts will interpret the scope of a "research report" under the expanded text. Expect industry guidance requests and potential enforcement or litigation tests about whether particular communications are bona fide research or part of an issuer‑driven marketing effort.
The Five Things You Need to Know
The bill amends 15 U.S.C. 77b(a)(3) — Section 2(a)(3) of the Securities Act of 1933 — through three targeted textual substitutions.
It replaces the statutory phrase "an emerging growth company" with "an issuer," removing the prior limitation to only EGCs.
It replaces the phrase "the common equity" with "any," extending the exception to any class of securities rather than only common stock.
The amendment is narrowly phrased: it changes wording but does not add new compliance deadlines, affirmative rulemaking tasks, or express exemptions elsewhere in the Act.
HB 3672 leaves intact the securities laws’ antifraud framework and does not explicitly alter FINRA rules or other self‑regulatory standards, creating potential interpretive gaps between statute and SRO obligations.
Section-by-Section Breakdown
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Short title — "Securities Research Modernization Act"
This single‑sentence section gives the Act its short title for citation. It has no operative effect on interpretation but signals the bill's intent to change how research communications are treated in securities offering contexts.
Textual expansion of the research‑report exception
This is the operative change: three substitutions in the statutory language of 15 U.S.C. 77b(a)(3). By changing "an emerging growth company" to "an issuer," and "the common equity" to "any," the provision ceases to tie the research‑report exception to a narrow class of issuers (EGCs) and a single security class (common stock). Practically, that broadens the universe of research (issuer coverage and security types) that the statute will not treat as an "offer" when related to a proposed offering. Because the bill does not modify surrounding provisions, existing judicial and regulatory interpretations of what qualifies as a "research report" will govern application of the expanded text until regulators or courts provide new guidance.
Narrow scope and implications for enforcement
The bill's amendment is focused and does not create parallel changes elsewhere in the Securities Act. That brevity means enforcement and private litigation will be the primary arenas where the new boundaries are tested. Agencies and SROs may issue guidance or adjust internal rules to account for the broader statutory exception, but the text itself imposes no administrative framework, safe harbors, or implementation timeline.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Sell‑side research departments and independent analysts — They gain clearer statutory cover to publish or distribute issuer‑specific reports in connection with offerings that previously might have been curtailed when an issuer was not an EGC or where the security class was not common equity.
- Issuers conducting public offerings — Issuers can expect a wider range of third‑party commentary to circulate during offerings, which can support price discovery and investor outreach without automatically triggering registration technicalities tied to research.
- Broker‑dealers and market‑making desks — Firms that distribute research will face fewer statutory constraints on distribution around offerings, potentially facilitating secondary market liquidity and institutional coverage during capital raises.
Who Bears the Cost
- Retail investors and long‑only funds — They bear the risk that expanded pre‑offering research could be more closely aligned with issuer or distribution interests, raising information‑quality and conflict‑of‑interest concerns.
- Compliance teams at broker‑dealers and investment banks — These teams must revisit quiet‑period policies, disclosure controls, and documentation practices to manage the broader scope of permissible communications and to defend against potential enforcement claims.
- Regulators and self‑regulatory organizations (FINRA) — The SEC and FINRA may see increased demand for guidance and enforcement resources to clarify how the narrowed statutory boundaries between permissible research and prohibited offering activity apply in practice.
Key Issues
The Core Tension
The bill pits two legitimate goals against one another: increasing the flow of independent research around capital raises to aid price discovery, versus protecting investors and market integrity from research that functions as unregistered marketing or that amplifies issuer‑side conflicts; the statute’s textual expansion helps the first goal but leaves the second to enforcement, guidance, and market discipline.
The amendment’s simplicity is its central implementation challenge. Changing a few words in a statute can produce significant interpretive work for regulators and courts without giving them explicit criteria to follow.
Key ambiguities include how to define a "research report" under the expanded language, and whether materials that look like research but are coordinated with an issuer or underwriter retain protection. Existing antifraud provisions remain in force, but they do not resolve line‑drawing questions about ordinary, permitted research versus disguised marketing.
Another practical tension is the relationship between the statutory exception and self‑regulatory rules and market practices. FINRA and underwriters have long maintained quiet‑period standards and conflict‑mitigation practices that go beyond statutory text.
The bill does not amend FINRA rules, so market participants will need to reconcile a broader statutory exception with tighter SRO or contractual restrictions. Finally, opening the exception to "any" security class raises novel questions for fixed‑income and hybrid offerings where market mechanics and investor expectations differ from equity markets; courts and regulators will need to decide whether and how precedents developed for equity research translate to those contexts.
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