|
IPOs via Net made easier
|
 |
July 16, 1999: 8:30 a.m. ET
SEC allows Wit Capital to expand time for individual investors to lock in order
|
NEW YORK (CNNfn) - The Securities and Exchange Commission, in a landmark decision this week, effectively removed one of the obstacles individual investors encounter when trying to buy into an initial public offering.
In a letter to online investment banking firm Wit Capital, the SEC issued a "no-action" ruling that allows Wit to expand the time during which its customers may reconfirm their conditional offers to participate in an IPO.
Customers may now reconfirm their offers within two days prior to the time the SEC declares an offering effective. Normally that declaration takes place the same day as the pricing of an IPO. To date, securities firms have been required to reconfirm a customer's offer only after the declaration of effectiveness was issued.
While the regulation has not posed a problem for traditional securities firms, whose primary IPO clients are select large institutions, it left very little time for online investment brokers to reconfirm with individual investors - since an issue usually starts to trade publicly the day after it is priced.
"Today's ruling paves the way for individual investors to participate in capital raising in an orderly and sensible framework that does not require prospective investors to sit by their computers waiting night after night for a message indicating the transaction was about to occur," said Wit Capital founder and chief strategist Andrew Klein. "The SEC should be applauded for recognizing that the law was frustrating the clear intentions of online individual investors to directly participate in capital formation -- and moving to ease their frustration."
Small investor still has a ways to go
Experts told the Wall Street Journal that while the SEC's ruling technically applies only to Wit Capital, it likely will affect practices at other online brokerages.
Still, there are other constraints on individual investors when it comes to participating in IPOs. For one, even the biggest of online brokers still have a hard time securing large blocks of shares from traditional IPO underwriters, thereby limiting the number of online customers who can take part in an offering.
Traditionally, the market for IPOs has been reserved for institutional investors and a brokerage house's wealthiest of retail clients. Even with the advent of online investing, which has democratized the marketplace more than ever, investors have encountered numerous stumbling blocks when it comes to buying IPOs.
But the SEC's move may be a sign that more individuals will be able to get in on the ground floor of new offerings. 
|
|
|
|
|
|
Wit Capital
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
