Initial Public Offerings:
Eligibility To Get Shares at Broker-Dealers

No brokerage firm can guarantee you will be able to purchase shares in an Initial Public Offering (IPO).

While it can be difficult for individual investors to buy IPO shares, more and more firms, including several online brokers, offer IPOs. Because these firms often have a small allotment of shares to sell to the public, your ability to buy these shares – especially "hot" IPOs – may be limited no matter which firm you do business with.

By their nature, investing in an IPO is a risky and speculative investment. Brokerage firms must consider if the IPO is appropriate for you in light of your income and net worth, investment objectives, other securities holdings, risk tolerance, and other factors. A firm may not sell to you IPO shares unless it has determined the investment is suitable for you.

Your brokerage firm may also sell the IPO only to selected clients. For example, before you can purchase an IPO, some firms require that you have a minimum cash balance in your account, are an active trader with the firm, or subscribe to one of their more expensive or "premium" services. In addition, some firms impose restrictions on investors who "flip" or sell their IPO shares soon after the first day of trading to make a quick profit. If you flip your IPO shares, your firm may refuse to sell you other IPOs altogether or prevent you from buying an IPO for several months. You can often find these cash requirements and eligibility policies on the firm's website.

Initial Public Offerings
Why Individuals Have Difficulty Getting Shares

The underwriters and the company that issues the shares control the IPO process. They have wide latitude in allocating IPO shares. The SEC does not regulate the business decision of how IPO shares are allocated.