Series 7: 12.5.6 Prohibitions On Spinning

Taken from our Series 7 Top-off Online Guide

12.5.6 Prohibitions on Spinning

FINRA prohibits 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. Such persons include officers and directors who have used the broker-dealer for investment banking services in the last 12 months, plan to use them in the next 3 months, or have stated or implied commitment to use them in the future. FINRA extends this prohibition to persons materially supported by such executive officers and directors.

FINRA Rule 5131

Sample Question

Which of the following actions is not prohibited during an IPO?

A. Selling shares of an IPO to a secretary who works for a broker-dealer

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