General Securities Sales Supervisor (Series10) Practice Exam

According to FINRA Rule 5130, who is allowed to purchase an IPO?

1. A member firm for its own account

2. An underwriter in the syndicate

3. The spouse of a bank president

4. The self-supporting father of a registered representative

The correct answer is: The spouse of a bank president

The correct answer highlights a specific exemption in FINRA Rule 5130, which addresses restrictions on the purchase of new issue securities (IPOs) to prevent conflicts of interest and ensure fair access. This rule prohibits certain individuals and entities from purchasing IPOs, particularly insiders and their family members. In this context, the spouse of a bank president is allowed to purchase an IPO because the rule primarily focuses on restricting purchases by those directly connected to member firms, underwriters, and their immediate family members, not extending this restriction to the spouses of bank executives. This exemption is designed to balance the interests of institutional investors with those of individual investors and allow certain relatives access to new issues that might otherwise be restricted. Other options, such as a member firm purchasing for its own account or an underwriter in the syndicate, would be violations of the rule, as these parties typically have privileged access to IPOs, creating potential conflicts. The self-supporting father of a registered representative also falls under similar restrictions, as he would be considered an immediate family member of someone involved in the securities industry. Thus, the correct answer reflects an understanding of the nuanced regulations governing IPO purchases.