SEC Rule Provides Safe Harbor Under Investment Company Act for Research and Development Companies

Mondaq Business Briefing, September, 2003 by Gordon H.Hayes

Article by Gordon H. Hayes, Jr., Jocelyn M. Arel, Mitchell S. Bloom, Jeffrey M. Held

Safe Harbor Particularly Useful to Biotechnology Companies

Recently, the Securities and Exchange Commission (the "SEC") adopted Final Rule 3a-8 (the "Final Rule") under the Investment Company Act of 1940, as amended (the "40 Act"). The Final Rule provides a non-exclusive safe harbor from the definition of "investment company" for biotechnology and other companies engaged in long-term research and development ("R&D") that meet certain criteria relating, among other things, to the size of its R&D and investment-related expenses and compliance with restrictions on the investment of cash in securities pending use in its business. Under the Final Rule, biotechnology companies...