FINRA modified a proposal that would amend Rule 5130 ("Restrictions on the Purchase and Sale of Initial Equity Public Offerings") and Rule 5131 ("New Issue Allocations and Distributions"). Comments on the amended proposal must be submitted by December 3, 2019.

As previously covered, the proposal would exempt additional persons and offerings from the scope of the rules, and conform the exemptions in the two rules more closely.

In response to public feedback, FINRA proposed amendments to Rule 5130 that would:

  • remove the proposed limitation on portfolio managers of certain family investment vehicles;
  • prohibit a foreign public investment company from being formed for the purpose of allowing restricted persons to invest in new issues;
  • exclude U.S.-organized employee retirement benefit plans;
  • amend the proposed exclusion for foreign offerings to offerings without shares registered for sale in the United States;
  • recognize employees or directors of affiliated franchisees;
  • exclude the offerings of a special purpose acquisition company from the definition of "new issue";
  • expand the list of approved sovereign investment vehicles; and
  • delete references to persons listed on Schedule C of Form BD ("Uniform Application for Broker-Dealer Registration").

FINRA also proposed amendments to Rule 5131 that would:

  • exclude certain transfers to immediate family members from the public announcement requirement; and
  • codify existing guidance on disclosures in a publicly filed registration statement.

Additionally, FINRA proposed amendments to Rules 5130 and 5131 that would clarify:

  • "the application of the rules to independent allocations to non-U.S. persons by foreign non-member broker-dealers participating in an underwriting syndicate"; and
  • "that the issuer-directed provisions apply to securities directed by a single affiliate or a single selling shareholder."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.