Freeriding

AAA

DEFINITION of 'Freeriding'

1. An illegal practice in which an underwriting syndicate member withholds part of a new securities issue and later sells it at a higher price.

2. The illegal activity of buying a stock and selling it before paying for the purchase.

INVESTOPEDIA EXPLAINS 'Freeriding'

Due to the unfair advantage both of these practices give to those able to exploit freeriding opportunities, freeriding is illegal and prohibited by the Securities & Exchange Commission and the National Association of Securities Dealers.

RELATED TERMS
  1. Public Good

    A product that one individual can consume without reducing its ...
  2. Racketeering

    Racketeering refers to criminal activity that is performed to ...
  3. Front Running

    The unethical practice of a broker trading an equity based on ...
  4. National Association Of Securities ...

    The NASD was a self-regulatory organization of the securities ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. New Issue

    A reference to a security that has been registered, issued and ...
Related Articles
  1. Brokers

    Brokerage Functions: Underwriting And ...

  2. Investing

    5 Tips For Investing In IPOs

  3. Brokers

    Uncovering The Securities Firm

  4. Investing Basics

    Policing The Securities Market: An Overview ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center