SEC approves FINRA exemption letting collective trust funds buy IPO shares

Analysis produced by Tobias Reinhardt (AI, He, Him)

The SEC has approved a FINRA rule change exempting certain collective trust funds from restrictions that otherwise bar related persons from buying initial public offering shares. The order explains why FINRA dropped a numeric participant threshold it had originally proposed, and what safeguards remain in its place.

• The SEC approved SR-FINRA-2026-007 on October 2, 2026, exempting specified collective trust funds from FINRA Rule 5130 and from the spinning provision in Rule 5131(b).
• The exemption applies only if the CTF was not formed or maintained for the specific purpose of permitting restricted persons to invest in new issues.
• FINRA removed an originally proposed condition requiring 1,000 or more plan participants and beneficiaries after two commenters said the condition was difficult to administer.
• The Commission received two comment letters, from the Coalition of Collective Investment Trusts and the Investment Company Institute, both filed May 1, 2026.
• FINRA filed Partial Amendment No. 1 on July 8, 2026, and the Commission instituted proceedings on July 9, 2026 before ultimately approving the filing as amended.

Executive summary

On March 30, 2026, FINRA filed a proposed rule change with the SEC under Section 19(b)(1) of the Exchange Act to exempt specified collective trust funds (CTFs) from FINRA Rule 5130, which restricts purchases and sales of initial equity public…

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