FINRA Amends Rules to Allow BDAs Greater Access to IPOs

FINRA exempted "business development companies" ("BDCs") from certain requirements that limited their participation in initial public offerings ("IPOs").

FINRA amended Rule 5130 ("Restrictions on the Purchase and Sale of Initial Equity Public Offerings") and Rule 5131(b) ("New Issue Allocations and Distributions") to allow BDCs to participate without certifying that they are free of "restricted persons" or "covered persons." Rule 5130 restricts the sale of IPO shares to accounts with certain financial professionals or insiders, while Rule 5131(b) prohibits "spinning"—the allocation of IPO shares to executives of investment banking clients. 

Under the exemption, non-traded and private BDCs (so long as they were not formed or maintained to benefit restricted persons) gain the same access to IPOs as traded BDCs and registered investment companies. FINRA stated that the change would help these entities diversify their portfolios and support capital formation.

The amendments became effective on July 23, 2025.