Series 28: Selling To Restricted Persons

Selling to Restricted Persons

Initial public offerings must be offered fairly to all public investors and must not advantage industry insiders. No broker or dealer may sell shares of an IPO to an account in which a “restricted person” has a beneficial interest, subject to certain limited exceptions. Restricted persons are:

• • Broker-dealers and their personnel
• • Finders and fiduciaries to the lead underwriter, such as lawyers, accountants, or consultants
• • Portfolio managers
• • Individuals with a beneficial interest in the broker-dealer

Accounts fall under the rule if a restricted person has beneficial interests in at least 10% of the account.

The rule extends to the immediate family members of a restricted person. Immediate family members include children, spouses, parents, sib