Under the following conditions, the terms “offers,” “participates,” or “participation” in section 2(a)(11) of the Act shall not be deemed to apply to the publication or distribution of research reports with respect to the securities of an issuer which is the subject of an offering pursuant to a registration statement that the issuer proposes to file, or has filed, or that is effective:

The broker or dealer (and any affiliate) that has distributed the report and, if different, the person (and any affiliate) that has published the report have not participated, are not participating, and do not propose to participate in the distribution of the securities that are or will be the subject of the registered offering.

In connection with the publication or distribution of the research report, the broker or dealer (and any affiliate) that has distributed the report and, if different, the person (and any affiliate) that has published the report are not receiving and have not received consideration directly or indirectly from, and are not acting under any direct or indirect arrangement or understanding with:

The issuer of the securities;

A selling security holder;

Any participant in the distribution of the securities that are or will be the subject of the registration statement; or

Any other person interested in the securities that are or will be the subject of the registration statement.

1. The regular price being paid by the broker or dealer for independent research, so long as the conditions of this paragraph (b) are satisfied; or

2. The regular subscription or purchase price for the research report.

The broker or dealer publishes or distributes the research report in the regular course of its business.

The issuer is not and during the past three years neither the issuer nor any of its predecessors was:

A blank check company as defined in Rule 419(a)(2) (§ 230.419(a)(2));

A shell company, other than a business combination related shell company, each as defined in Rule 405 (§ 230.405); or

An issuer for an offering of penny stock as defined in Rule 3a51-1 of the Securities Exchange Act of 1934 (§ 240.3a51-1 of this chapter).

Definition of research report. For purposes of this section, research report means a written communication, as defined in Rule 405, that includes information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer, whether or not it provides information reasonably sufficient upon which to base an investment decision.