Auction system and method for pricing and allocation during capital formation

1. A system for determining the clearing price and allocation of equity shares of a company, the system comprising:

a computer system coupled via a communications network to a user input terminal

where at least one qualified potential purchaser submits bids for the equity shares;

wherein the computer system is configured to:

provide information about an offering for the equity shares to at least one qualified potential purchaser and at least one non-qualified potential purchaser,

accept bids only from one or more qualified potential purchasers via the communications network, wherein at least one non-qualified potential purchaser submits a bid through a qualified potential purchaser,

determine the clearing price based upon the bids that have been accepted; and

allocate the equity shares to prospective investors based on the clearing price.

2. The system of claim 1 wherein one of the one or more qualified potential purchaser comprises a financial institution, an on-line brokerage firm, an investment advisor, a certified financial planner, a certified financial advisor, or an insurance company.

3. The system of claim 1 wherein the at least one non-qualified potential purchaser comprises an individual investor who is not a qualified potential purchaser.

4. The system of claim 1 wherein:

at least one of the one or more qualified potential purchasers comprises a qualified institutional investor,

at least one other of the one or more qualified potential purchasers comprises a qualified non-institutional investor, and

the computer system is further configured to:

permit the extension of credit for a bid only to qualified institutional investors; and

require qualified non-institutional investors to have funds in an account sufficient to cover a bid.

5. The system of claim 1 wherein information about the offering comprises one or more of a prospectus, a description of the offering, auction guidelines and rules, instructions on how to open a brokerage account, marketing materials associated with the offering, a registration form, or a disclaimer.

6. The system of claim 1 wherein the system is configured to permit at least one non-qualified potential purchaser to submit a bid thorough a qualified potential purchaser that is an on-line brokerage firm.

7. The system of claim 1 wherein the computer system comprises:

an auction server for processing the bids to determine the clearing price and the number of allocated equity shares to each prospective investor;

an auction database for storing deal information concerning an auction transaction; and an account information server for storing and managing prospective investor account information.

8. The system of claim 7 wherein one of the bids is associated both with the prospective investor account information and with deal information concerning the auction transaction.

9. The system of claim 7 wherein deal information comprises one or more of a symbol used to designate a company for which shares are being auctioned, a price range for a deal, a number of shares expected to be sold, an expected opening date of the deal; an expected closing date of the deal, and a limitation on a number of shares that a prospective investor may purchase.

10. The system of claim 7 wherein deal information is stored on one or more of the account information server and the auction server.

11. The system of claim 1 further comprising a research information server that provides research information concerning an offering.

12. The system of claim 11 wherein research information comprises the full text of a prospectus that describes the proposed offering.

13. The system of claim 1 wherein the system is configured to place a limit on a bid received by a particular prospective investor.

14. The system of claim 1 wherein the computer system is further configured to fill sales of the shares as allocated at a public offering price that is less than or equal to the clearing price.