FINRA Files Proposed Rule Change to Amend FINRA Rule 5131

FINRA has filed a proposed rule change to amend FINRA Rule 5131 ("New Issue Allocation and Distributions") which is intended to prohibit "spinning": the practice of broker-dealers providing corporate insiders with preferential access to new issue stock in exchange for such insiders directing investment banking business to the relevant broker-dealer. The proposed rule amendment would somewhat simplify the compliance burden on broker-dealers selling new issue stock to private funds and correspondingly would simplify the compliance burdens on private funds seeking to purchase such stock.

See: Text of Proposed Rule Change; FINRA Press Release.
See generally: Lofchie's Guide to Broker-Dealer Regulation: Customers Chapter (discussion of unlawful IPO allocation practices).