The prohibited action of a client who buys securities and then sells them without paying for the initial purchase. See also: Frozen Account.
(1) When an underwriter does not make a legitimate offering of a hot issue, but instead holds back (retains) some securities for its own use. (2) When a client buys and sells securities without paying for them. See: Frozen Account.
1: A situation that occurs when a member of an underwriting syndicate withholds a portion of a public offering of a new securities issue with the intent to sell it at a price higher than the initial offering price. This is a violation of securities regulations because the underwriter is not making a legitimate offering to the public. 2: A situation that occurs when a customer purchases a security, then sells the same security and uses the proceeds to pay for the purchase. This practice is prohibited by Federal Regulation T which requires that customers pay for securities within prespecified time frames. Firms are required to freeze or restrict customer accounts that engage in this practice for 90 days. See: Frozen Account; Initial Public Offering