DEFINITION of 'NASD Rule 2790'

A ruling passed by the National Association of Dealers (NASD), a self-regulating organization, prohibiting certain individuals from performing trades in hot-issue Initial Public Offering (IPO) equity. The rule was enacted in March of 2004, and is designed to help make the IPO market more equitable for all traders and dealers involved.

BREAKING DOWN 'NASD Rule 2790'

NASD Rule 2790 ensures that members of the NASD cannot purchase IPO equity at the cost of another investor, sell IPO equity for anything other than the offering price, and cannot trade IPO equity for personal gains.

Rule 2790 specifies that certain members of the NASD, others related to NASD members by business or relation, and other restricted persons may not trade IPO equity that would be at the cost of another investor. However, there are always exemptions to the rule.

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RELATED FAQS
  1. Do I need to be a U.S. citizen to sit for any NASD examinations?

    No. The National Association of Securities Dealers (NASD) does not require a candidate to be a U.S. citizen to sit for an ... Read Answer >>
  2. Do I have to reach a certain age before I can write an NASD exam?

    The National Association of Securities Dealers (NASD) does not stipulate that individuals must be a minimum age to write ... Read Answer >>
  3. My job with a member firm has recently been terminated and I do not want to write ...

    The National Association of Securities Dealers (NASD) states that if you become employed with another member firm within ... Read Answer >>
  4. A market maker in the stock ABCD has filled a portfolio over time with prices as ...

    C is closest. Mark-up rules of fair practice on Nasdaq require market pricing. The NASD views markups in excess of 5% above ... Read Answer >>
  5. I want to start my own brokerage company, how do I become a member of FINRA?

    Before you read on, note that the Financial Industry Regulatory Authority (FINRA), (previously the National Association of ... Read Answer >>
  6. A registered representative has discovered an article in a major news magazine that ...

    The correct answer is c. The use of magazines, as well as reprints, falls under the NASD rules regarding communications with ... Read Answer >>
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