NASD Rule 2790

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.