South-Western Legal Studies in Business

Securities Firms Immune from Antitrust Action when Subject to SEC Oversight
Description Appeals court affirmed that firms that underwrite and distribute new securities are immune from antitrust attack for certain restrictions the firms put on the resale of new securities. The SEC regulates the industry and has antitrust authority over this matter and has decided to let the practices stand, so private action may not proceed.
Topic Antitrust
Key Words Price Fixing; Immunity; Securities Law
C A S E   S U M M A R Y
Facts Investors brought a class action suit against underwriters and brokerage firms that manage public offerings through which they distribute shares of stock. According to plaintiffs, defendants do not permit plaintiffs to resell their public offering stock during a prescribed retail restricted period of 30 to 90 days after the initial offering distribution. That is, stock flipping is prohibited. Plaintiffs contend that institutional buyers of such stock do not face such restrictions. Plaintiffs contend that defendants are engaged in a price-fixing conspiracy to restrict competition in the stocks they underwrite. The district court dismissed the suit. Plaintiffs appealed.

Affirmed. The defendants enjoy implied immunity from the antitrust laws because the matters involved are specifically subject to SEC jurisdiction, which includes antitrust jurisdiction over the securities industry. The SEC has studied price stabilization practices and flipping and made a judgment not to regulate the practice subject to this suit.

Citation Friedman v. Salomon/Smith Barney, Inc., 313 F.3d 796 (2nd Cir., 2002)

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