Investors fight back

Author: | Published: 4 May 2011

For the past several years, the Financial Industry Regulatory Authority (Finra) and its predecessor, the National Association of Securities Dealers (NASD), have been preparing and revising rules to address alleged abuses in connection with new issues.

In 2003, the NASD adopted NASD Rule 2790 (now Finra Rule 5130), Restrictions on the Purchase and Sale of Initial Equity Public Offerings. Rule 2790/5130 was subsequently amended in 2005 and 2007.

Since the time Rule 2790 was first proposed, the NASD and later Finra have been seeking to address particular problems with the allocation and distribution of new issues. The problem, generally, has been the perception that the general investing public does not have the equal opportunity to access potentially profitable new issues.

After several rounds of amendments, in September 2010, the US Securities and Exchange Commission (SEC) approved Rule 5131, New Issue Allocations and Distributions. As finally adopted, Rule 5131 is...