SEC Approves FINRA Exemption for Certain Collective Trust Funds from IPO Rules

On July 9, 2026, the Securities and Exchange Commission issued an order, Release No. 34-106576, File No. SR-FINRA-2026-007, approving FINRA's proposed rule change, as modified by Partial Amendment No. 1, to exempt specified collective trust funds (CTFs) from FINRA Rules 5130 and 5131(b). The order follows FINRA's filing on March 30, 2026, and the Commission's designation of a July 9, 2026 deadline to act.

The exemption applies to CTFs that are not formed or maintained for the specific purpose of permitting restricted persons to invest in new issues. Under the amendment, these funds receive the same treatment as registered investment companies and common trust funds, which are already exempt under paragraph (c)(1) and (c)(2) of Rule 5130 and by reference under Rule 5131(b).

FINRA removed a previously proposed condition requiring a CTF to have investments from at least 1,000 plan participants and beneficiaries. Comment letters from the Coalition of Collective Investment Trusts and the Investment Company Institute highlighted practical difficulties in tracking participant counts, leading FINRA to rely on existing regulatory oversight rather than a numeric threshold.

The Commission concluded that the rule change complies with Section 15A(b)(6) of the Exchange Act and is reasonably designed to protect investors while expanding access to initial public offerings through regulated pooled investment vehicles. The order reflects consideration of efficiency, competition, and capital formation impacts.

The rule change was originally published for comment on April 10, 2026, with the comment period closing May 1, 2026. The Commission received two comment letters, and FINRA's response and partial amendment were filed on July 8, 2026, before the final approval on July 9, 2026.