SEC approves amendment to FINRA IPO allocation rule 5131, easing compliance for fund investors

Abstract

Purpose

The purpose of the paper is to describe the recent amendments to FINRA's IPO Allocation Rule that were approved by the US Securities and Exchange Commission.

Design/methodology/approach

The paper provides a description of the IPO Allocation Rule and its operation, followed by a description of the IPO Allocation Rule amendments recently amended.

Findings

On November 27, 2013, the Securities and Exchange Commission approved a change to FINRA's IPO allocation rule 5131 (the “amendment”). The amendment allows a fund of funds or other collective investment account that is investing in an IPO to rely on a written representation from an unaffiliated private fund investor that does not look through to its beneficial owners, provided that such unaffiliated private fund is managed by an investment adviser, has assets greater than $50 million, and meets certain other indicia of independence that are described.

Originality/value

The paper provides practical guidance from experienced regulatory lawyers regarding an amendment to an important rule governing IPO sales and allocation practices.

Citation

S. Gittleman, C., D. Sacks, R. and D. Morton, J. (2014), "SEC approves amendment to FINRA IPO allocation rule 5131, easing compliance for fund investors", Journal of Investment Compliance, Vol. 15 No. 1, pp. 52-57. https://doi.org/10.1108/JOIC-01-2014-0002