FINRA Lets BDCs Jump Into Hot IPO Pools Freely
Published Date: 3/31/2025
Notice
Summary
FINRA wants to give certain Business Development Companies (BDCs) a break by exempting them from some rules that limit how they can buy and sell new stock offerings. This change means these BDCs can participate more freely in initial public offerings without the usual restrictions, starting once the SEC approves it. Investors and BDCs should watch for this update, as it could open up new opportunities in the market.
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Non‑traded BDCs Exempted From New‑Issue Rules
If the SEC approves this change, non‑traded business development companies (BDCs) with shares registered under the Securities Act would be exempt from FINRA Rule 5130(a) and Rule 5131(b). That means non‑traded BDCs could receive allocations in initial public offerings (IPOs) without having to demonstrate they lack restricted or covered persons as beneficial owners, allowing them to include IPOs as part of the 30% of assets permitted under the Investment Company Act.
Reduced Compliance Costs For Non‑traded BDCs
The proposed exemption would reduce the operational expense for non‑traded BDCs of demonstrating eligibility to purchase new issues (for example, collecting and verifying whether restricted or covered persons are beneficial owners). FINRA says these savings would make it easier for non‑traded BDCs to invest in IPOs up to the 30% limit allowed by the Investment Company Act.
More Competition and Capital Formation via IPO Access
FINRA expects the exemption to increase competition among non‑traded BDCs, traded BDCs, and registered investment companies for investors because non‑traded BDCs could include IPOs in their portfolios. FINRA says this may promote capital formation by giving more investors access to IPOs and by allowing non‑traded BDCs to diversify into new issues consistent with other rules.
Risk That Restricted Persons Could Gain IPO Access
FINRA notes a risk that restricted or covered persons might invest in a non‑traded BDC to gain indirect access to IPO allocations. FINRA believes this risk is limited because only up to 30% of a BDC's assets can be invested in new issues and because setting up and maintaining a non‑traded BDC is costly.
Personalized for You
How does this regulation affect your finances?
Personalize government policy and PRIA will tell you what this federal register document means for your household, plus every other regulation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.
Key Dates
Department and Agencies
Related Federal Register Documents
2026-19260, Rescission of Rule 14a-8's Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4
The SEC wants to stop its federal rule that controls how shareholders can make proposals at company meetings, letting state laws and company rules take over instead. They’re also changing rules so companies can sometimes vote on proposals not in their official materials—but shareholders can opt out if they want. This affects investors and companies, with comments open until November 20, 2026, and could shake up how shareholder voices are heard and counted.
2026-18424, Political Contributions by Certain Investment Advisers
The Securities and Exchange Commission (the "Commission" or the "SEC") is proposing to rescind the political contribution rule under the Investment Advisers Act of 1940 (the "Advisers Act"), which prohibits investment advisers from providing investment advisory services for compensation to a government client for two years after an adviser or any covered associate of the adviser makes a contribution to certain categories of elected officials or candidates, among other prohibitions. In the more than fifteen years since the rule was adopted, implementation challenges associated with the political contribution rule have resulted in a range of significant unintended consequences, including compliance practices among some investment advisers that may have had the effect of restricting all political contributions by the investment advisers and their employees. Market participants also have stated that the political contribution rule is burdensome, complex, and both lacks clarity and creates a de facto strict liability standard. The Commission is of the view that other existing requirements of the Advisers Act and its associated rules, including prohibitions on fraud, fiduciary duty requirements, the compliance rule, and the code of ethics rule (defined below), are likely sufficient to address pay-to-play practices while allowing an adviser the flexibility to implement an approach that is more appropriately tailored to its particular risks, rendering the political contribution rule unnecessary. The Commission also is proposing to amend the rule under the Advisers Act pertaining to books and records consistent with the proposed rescission.
2026-18190, Transfer Agent Rules
The U.S. Securities and Exchange Commission ("SEC" or "Commission") is proposing to adopt new rules, amend existing rules, amend the existing form for registration with the Commission as a transfer agent (Form TA-1) and the existing form for reporting activities of transfer agents (Form TA-2), and rescind an existing rule governing registered transfer agents. The proposals are designed to modernize the rules governing registered transfer agents.
2026-17183, Regulation Crypto Assets
The Securities and Exchange Commission ("Commission") is proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets. The proposed offering regime is intended to facilitate capital formation and accommodate innovation within the crypto asset markets while, at the same time, ensuring that investors are adequately protected and provided with the information they need to make informed investment decisions. The proposed rules would be set forth in a new regulation titled "Regulation Crypto Assets" and would include two exemptions from the registration requirements of section 5 of the Securities Act of 1933. The first exemption would permit offerings of up to $5 million during a four-year period. The second exemption would permit offerings of up to $75 million during each 12-month period. Under both exemptions, issuers would be required to make certain principles-based narrative disclosures available to their investors. In addition, issuers under the second exemption would be required to provide financial statements and would be subject to ongoing reporting requirements. Issuers that rely on these exemptions would remain subject to the antifraud and antimanipulation provisions of the Federal securities laws. The proposed rules also would include a conditional safe harbor from the term "investment contract" in the definitions of "security" in the Securities Act of 1933 and the Securities Exchange Act of 1934. If the conditions of that proposed safe harbor are satisfied, then a crypto asset would be deemed not to be subject to an investment contract for purposes of those definitions of "security."
2026-12163, The Trade-Through Rule and Locked and Crossed Markets Provisions of Regulation NMS
The SEC wants to scrap some old rules that stop stocks from being traded at worse prices and prevent confusing market quotes. This change affects stock traders and exchanges, aiming to simplify trading and possibly speed things up. If you want to share your thoughts, you’ve got until August 17, 2026, so don’t miss out!
2026-10373, Registered Offering Reform
The SEC wants to make it easier and cheaper for more companies to sell their stocks and bonds to the public. They’re opening up special forms and benefits to more businesses, updating rules to be more modern, and cutting red tape by overriding some state rules. If you’re a company planning to raise money, these changes could speed things up and save you money, with feedback due by July 27, 2026.
Previous / Next Documents
Previous: 2025-05447, Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 1308, Supervision of Accounts
Miami International Securities Exchange (MIAX) is updating its rule about how members supervise their accounts. Now, members must send an annual report to the Exchange to keep things clear and organized. This change kicks in right away and helps everyone stay on the same page without extra costs.
Next: 2025-05449, Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Fees for the Cboe Legacy Silexx Platform Versions
Starting April 1, 2025, Cboe Exchange is raising fees for its older Silexx trading platforms, called the Legacy Platforms. Traders and firms using these versions will see the new prices kick in right away. This change helps Cboe keep up with costs and improve services for everyone.