Vanderbilt Law Review


Harry S. Gerla

First Page



Increasing pressure from institutional investors during the last two decades has led to indirect discounting practices that some commentators contend threatens the fixed price offering system. In response to this concern the SEC in 1980 approved new NASD rules designed to bar direct or indirect discounting in fixed price public offerings of securities. In this Article Professor Gerla argues that the SEC erred in approving the new NASD rules. Professor Gerla states that the new rules change drastically the Commission's policy that the fixed price system operate without direct or indirect government enforcement. Further, he contends that the SEC approved the rules without empirical data sufficient to support arguments on either side. Professor Gerla concludes that the rule changes will encourage inefficiency in the investment banking industry and that the Commission's policy shift on the role of government in enforcing anticompetitive agreements in effect has allowed the reregulation of the underwriting industry.