SEC Approves FINRA Reforms Incorporating Key IPA Recommendations

On July 24, the SEC approved FINRA amendments to Rules 5110 and 5123, marking a significant positive outcome for IPA members following more than a year of IPA advocacy.

IPA first recommended targeted improvements to Rule 5110 in March 2025. FINRA incorporated key IPA recommendations into its proposal, and IPA subsequently urged the SEC to approve the amendments as submitted.

The final Rule 5110 amendments provide greater clarity around underwriting compensation and, importantly, establish an exclusion for qualifying capital investments in direct participation programs (DPPs) and nonlisted REITs.

The amendments reflect several priorities advanced by IPA, including:

• Making the exclusion self-operating, eliminating the need for case-by-case FINRA approval when applicable conditions are met.
• Treating qualifying capitalization transactions completed before an issuer has material assets as occurring at or above NAV.
• Extending the exclusion to qualifying capital investments made before or during an offering’s distribution, rather than limiting it to initial seed capital.

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The SEC also approved amendments to Rule 5123 updating FINRA’s private placement filing exemptions for certain family offices and other institutional entities meeting applicable $5 million thresholds.

Together, the changes should provide greater regulatory certainty, reduce the costs and delays associated with individual exemption requests, and better reflect how modern DPPs and nonlisted REITs are capitalized.