Spinning
Rule 5131 also prohibits the act of spinning. Spinning is when a member firm promises shares of an IPO to persons who are in a position to direct securities business to the firm in the future. The kinds of persons include officers and directors who have used the broker-dealer for investment banking services in the last 12 months or plan to use them in the future.
Example Question: Which of the following actions are not prohibited during an IPO?
- A. Selling shares of an IPO to a secretary who works for a broker-dealer
- B. Selling shares of an IPO to an officer of a company that has done investment banking bu