SEC Bulletin on Aftermarket Purchases, Tying Transactions

 

Tying aftermarket purchases to initial distributions is prohibited.

By John M. Baker, Esq.


SEC Bulletin on Aftermarket Purchases

On August 25, 2000, the SEC’s Division of Market Regulation issued a legal bulletin stating that underwriters, broker-dealers, and other distribution participants are prohibited from soliciting or requiring their customers to make aftermarket purchases until the distribution is completed. Staff Legal Bulletin No. 10 (Aug. 25, 2000).

The bulletin comes in response to complaints that, while participating in a distribution of securities, underwriters and broker-dealers have solicited their customers to make additional purchases of the offered security after trading in the security begins, or have required their customers to agree to buy additional shares in the aftermarket as a condition to being allocated shares in the distribution.

The staff believes that these practices are prohibited by Regulation M. The bulletin is available online at http://www.sec.gov/offices/marketr/slbmr10.htm


Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, http://www.egroups.com/group/fundlaw. To subscribe to FundLaw, send a blank e-mail to fundlaw-subscribe@egroups.com