In new issue underwritings, a situation in which a broker-dealer offers to buy a security from a client at premium. In return, the client will purchase shares of the new issue. The underwriter can still profit on the deal if the premium amount is less than what would be received from the underwriting spread. See: Broker-Dealer; Initial Public Offering; New Issue; Underwrite; Underwriting Spread
A practice in violation of NASD principles by which a broker/dealer overpays a customer for his security to enable him to subscribe to a security offered by that broker/dealer at a higher markup than the loss to be sustained when the firm sells the customer's security at prevailing market prices.
1. Excessive buying and selling of an investors stocks by their broker, also known as churning. 2. When a company is growing its sales faster than they can finance them, this usually leads to enormous accounts payable.