Regulation M

Regulation M
USA
A collection of SEC rules implemented under the Exchange Act. Regulation M, which governs the activities of underwriters, issuers, selling security holders and others in connection with offerings of securities, is designed to prevent any person with a financial interest in a distribution of securities from manipulating the market price of such securities, thereby misleading potential investors as to the "true" state of the public market for the securities being distributed. During any offering and particularly during an IPO of equity securities, price fluctuations are common and there is the potential for price manipulation to maintain the demand for a hot issue or to prop up the demand for a soft issue. At the same time, the introduction of a substantial amount of securities of the same class as outstanding equity or debt securities can have a depressive effect on the price of the outstanding securities. To maintain an orderly market, it may be necessary for an issuer or underwriter to engage in market price stabilization by legitimate efforts to provide demand for the securities.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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