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NASD Rule 2110 and the VA Linux IPO

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Abstract

On December 9, 1999, VA Linux issued shares to the public and left over $900 million on the table for investors. In the prospectus, the investment banker Credit Suisse First Boston (CSFB) stated it would receive a 7% gross spread as its compensation for underwriting the shares. Yet the SEC alleges some investors paid enormous commissions to CSFB in the form of a kick-back immediately after obtaining the IPO shares. Hence, CSFB had an economic interest in the IPO and there was not a full distribution of shares. This apparent violation of NASD Rule 2110 raises questions as to the credibility of the financial markets.

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Authors and Affiliations

  1. Mendoza College of Business, University of Notre Dame, Notre Dame, IN, 46556-5646, U.S.A.

    Tim Loughran

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  1. Tim Loughran
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Correspondence to Tim Loughran.

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Loughran, T. NASD Rule 2110 and the VA Linux IPO. J Bus Ethics 62, 141–146 (2005). https://doi.org/10.1007/s10551-005-0179-3

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  • DOI: https://doi.org/10.1007/s10551-005-0179-3

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