Proposal to Amend FINRA Rule on New Issue Allocations and Distributions

SEC Release No. 34-64341

April 26, 2011

The SEC published for comment a FINRA proposal to amend Rule 5131 (New Issue Allocations and Distributions) to (1) "simplify" the spinning provision and (2) delay the implementation date of certain provisions. The proposal would delete paragraph (b)(1) of the rule, regarding the maintenance of policies and procedures to ensure that "investment banking personnel" are not involved in new issue allocation decisions. FINRA stated that the amendment is intended to address concerns that the term "investment banking personnel" could be read to prohibit certain "necessary functions" traditionally performed by syndicate personnel, and noted that firms are still required to have written policies and procedures as to the spinning prohibitions in paragraph (b)(2) of the rule.

In addition, FINRA proposed to delay the implementation date of the spinning provision, and of paragraph (d)(4) of the rule regarding market orders for shares of new issues, until September 26, 2011.

Cross References

SEC Release 34-63010 (approving Rule 5131)

FINRARN 10-60 (guidance on Rule 5131)

FINRA Rule 5131