12.5.5 Retaining IPO Shares in a Member Account
Underwriters and members of the selling group (and their agents) generally may not retain shares of the IPO for their own accounts to sell at a later time. However, underwriters may purchase unsold shares of an IPO under a standby agreement, if the following conditions are met:
- • It is disclosed in the prospectus.
- • It is stated in a written agreement.
- • A statement from the lead underwriter attests that it couldn’t find any buyers.
- • The shares will not be sold within three months.
Underwriters may place a portion of the issue in their accounts if it was stated in the underwriting agreement and the underwriters were unable to sell the shares to the public.
Sample Question 1
Jenny is an employee of a broker-dealer. She is a receptionist at the firm and is not a registered representative. She would like to purchase shares in an IPO that she has recently heard about at her office. Which of the following best describes her participation?
- A. Jenny may purchase shares of the IPO on the same basis as other customers.
- B. Jenny is prohibited from purchasing shares of the IPO, but her spouse may purchase shares on the same basis as other customers.
- C. Jenny may purchase shares of the IPO as long as the purchase quantity doesn’t exceed 200 shares.
- D. J