On October 6, 2017, the Fair Access to Investment Research Act of 2017 (FAIR Act) was signed into law. The FAIR Act directs the SEC to amend Rule 139 under the Securities Act of 1933 to expand the Rule’s safe harbor to provide that an investment fund research report regarding an ETF that is published or distributed by a broker-dealer, other than a broker-dealer that is, or is affiliated with, the ETF’s investment adviser, will not constitute an offer to sell the ETF’s securities pursuant to an effective registration statement, even if the broker-dealer participates in the offering of the ETF’s securities.

The FAIR Act provides that the expanded safe harbor may not be conditioned on a broker-dealer’s initiating or reinitiating research coverage of an ETF that is engaged in a continuous distribution of shares. The FAIR Act further provides that the expanded safe harbor may not require that an ETF covered by an investment fund research report be registered under the Investment Company Act of 1940 or be a reporting company under the Securities Exchange Act of 1934 for a period longer than that required by, or have a minimum float greater that that required by, Rule 139 and SEC Forms S-3 and F-3. In addition, the FAIR Act provides that the expanded safe harbor must require selfregulatory organizations to amend applicable rules to permit broker-dealers to rely on the expanded safe harbor, and must provide that a covered investment fund research report not be subject to Section 24(b) of the 1940 Act, although such reports would be subject to the 1940 Act and related rules to the extent they are not subject to a selfregulatory organization’s content standards.

The FAIR Act requires the SEC to propose an amendment to Rule 139 to expand the safe harbor in a manner consistent with the foregoing within 180 days, and to adopt a final amended Rule within 270 days, of the October 6, 2017 enactment date. Beginning 270 days after the enactment date, if the SEC has not adopted a final amended Rule 139 expanding the safe harbor, broker-dealers may rely on an interim expanded safe harbor in accordance with the terms set forth above. Nothing in the FAIR Act limits the applicability of applicable anti-fraud provisions of the federal securities laws to investment fund research reports covered by the expanded safe harbor, nor does the FAIR Act limit the authority of self-regulatory organizations to examine or supervise their members.