Standard Forms / Documentation / Guidelines
Association Drafts Model Form for Customer Certification of Eligibility to Purchase IPO Shares for Purposes of Complying with NASD Rule 2790 (Restrictions on the Purchase and Sale of IPO Equity Securities)
New NASD Rule 2790 prohibits a member firm from selling a new issue to any account in which a restricted person has a beneficial interest. The rule requires that a member firm, before selling a new issue to any account, meet certain preconditions for sale, which generally require the member to obtain a representation from the beneficial owner of the account that the account is eligible to purchase new issues in accordance with the rule. The rule also contains a series of general exemptions. In order to assist member firms in obtaining the required customer representations, the association published the "Certificate for the Purchase of Initial Public Offerings of Equity Securities."
The Certificate asks customers of the firm to certify whether or not the account is eligible to purchase IPO shares in accordance with the terms of the NASD rule. In addition, in connection with any new issue, the Certificate asks customers to represent that the customer will not act as a finder or in a fiduciary capacity to any managing underwriter of any new issue and that the customer shall notify the firm immediately in the event that such representation ceases to be true and correct.
The association has sought the assistance of and input from many of its member firms in the preparation of this model form agreement. Although SIFMA believes that member firms will generally be able to utilize the Certification in substantially the form proposed, SIFMA anticipates that member firms may need to modify the agreement or use a version better suited to the individual needs of the firm.