FINRA is proposing to create a new exemption category that would remove specified collective trust funds from the scope of Rules 5130 and 5131(b). Rule 5130 restricts the purchase and sale of initial equity public offerings, while Rule 5131(b) prohibits spinning—allocating IPO shares to corporate executives in exchange for investment banking business. The proposed exemption would permit qualifying CTFs to receive allocations of new equity offerings that are currently prohibited.

Compliance teams at broker-dealers should review their allocation practices and customer eligibility determinations to identify any CTF clients that may benefit from this exemption if finalized. The proposal is subject to SEC approval and public comment. Registered representatives should monitor for updates on the comment deadline and subsequent SEC action. If the exemption is approved, member firms may need to update their onboarding and allocation procedures to accommodate CTF eligibility for IPO participation.