Comment Letter to FINRA on Rule 5131(b), New Issue Allocations and Distributions — ‘Spinning’

MFA submitted a comment letter to FINRA on Rule 5131, New Issue Allocations and Distributions. In the letter, we explain that the structure and operation of hedge funds and funds of hedge funds make it highly unlikely that a hedge fund investor could engage in spinning through an investment in a hedge fund. The letter also explains that many hedge fund managers would comply with the Rule by restricting new issue allocations in a manner that was not intended by the Rule, and recommends that FINRA issue guidance to permit a hedge fund to use a limited look-through approach in applying the de minimis exemption.