53. Which of the following parties is permitted to purchase a security in an initial public offering (IPO)?
Answer: D
A mutual fund portfolio manager buying for the fund's portfolio
A mutual fund portfolio manager is permitted to purchase securities in an initial public offering (IPO) when buying for the fund's portfolio. This is allowed as mutual funds are considered institutional investors and play an important role in the IPO process.
A) A registered representative's (RR's) brother-in-law
A registered representative's brother-in-law is generally not permitted to purchase securities in an IPO. This restriction is in place to prevent conflicts of interest and ensure that securities are allocated fairly among investors.
B) An RR of a broker-dealer (BD) not involved in the underwriting
An RR of a broker-dealer that is not involved in the underwriting may still face restrictions regarding participation in an IPO. Typically, such representatives are prohibited from purchasing IPO shares to avoid any appearance of impropriety or conflicts of interest, regardless of their non-involvement in the underwriting.
C) A BD not affiliated with the syndicate for the IPO
A broker-dealer not affiliated with the syndicate for the IPO may be allowed to purchase shares; however, they must comply with specific regulations and may not have priority access to the shares. This could lead to limitations on their ability to participate effectively in the offering.
D) A mutual fund portfolio manager buying for the fund's portfolio
A mutual fund portfolio manager buying for the fund's portfolio is indeed permitted to purchase securities in an IPO. Mutual funds are recognized as institutional investors, and their participation is crucial for the liquidity and success of the offering.
Conclusion
The correct answer is D, as mutual fund portfolio managers are authorized to purchase securities in an IPO for their funds. Other options, such as family members of registered representatives or representatives of unrelated broker-dealers, face restrictions that disallow them from participating in IPOs, thereby reinforcing the importance of regulatory compliance in these transactions.