New FINRA Rule 5131 Relating to Allocation and Distribution of Shares in IPOs Approved by the SEC


Please note the following recent developments with respect to the new FINRA Rule 5131, as described in our previous client alert entitled "New FINRA Rule 5131 Relating to Allocation and Distribution of Shares in IPOs Approved by the SEC", dated March 23, 2011.

FINRA has proposed two changes to amend Rule 5131. FINRA first proposes to simplify the spinning provision of the rule set forth in Rule 5131(b) by deleting paragraph (b)(1), which requires that members establish, maintain and enforce policies and procedures reasonably designed to ensure that investment banking personnel have no influence in the new issue allocation of such members. This proposal is due primarily to concerns regarding how to interpret the term "investment banking personnel" which is not defined in the rule. Because firms are currently required to have written policies and procedures with respect to spinning prohibitions in paragraph (b)(2) pursuant to NASD Rule 3010, FINRA believes the purposes of the anti-spinning provision can still be served without this particular provision.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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