Proposed Exemption for Collective Trust Funds in IPO Allocations
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This proposal makes it easier for Collective Trust Funds (CTFs) to participate in initial public offerings (IPOs) by exempting them from certain restrictions. It aims to give more investors, particularly those with retirement plans, access to new shares of public companies, potentially expanding investment options and promoting market growth.
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Key Changes
- Exemption of CTFs from IPO purchase restrictions
- Requirement for CTFs to have over 1,000 participants
- Prohibition against forming CTFs specifically for restricted persons
Obligations
What this law requires
FINRA member firms must obtain a written representation from CTF account holders within 12 months before sale that the account is eligible to purchase new issues in compliance with Rule 5130
FINRA member firms must obtain a representation from banks, foreign banks, broker-dealers, investment advisers or other conduits that all purchases of new issues by CTFs are in compliance with Rule 5130
Member firms are prohibited from selling new issues to any CTF account in which a restricted person has a beneficial interest, except as otherwise permitted under Rule 5130
Member firms are prohibited from engaging in 'spinning' - allocating new issue shares to CTF accounts in which a covered person (current, former, or prospective investment banking client executive officer or director) has a beneficial interest
CTFs must maintain investments from 1,000 or more accounts and must not limit beneficial interests principally to trust accounts of restricted persons to qualify for exemptions from Rules 5130 and 5131(b)