FINRA Rule 5131 seeks to ensure public confidence in the initial public offering (IPO) process by prohibiting allocations by broker-dealers of new issues to accounts (including hedge funds) in which a past, current or prospective investment banking client of the broker-dealer holds a beneficial interest – a practice known as “spinning.”  Rule 5131 imposes direct prohibitions on broker-dealers and indirect obligations on hedge fund managers.  That is, to avoid violations of Rule 5131 when allocating new issues to a hedge fund, broker-dealers need information about investors in the hedge fund.  Specifically, broker-dealers need to know whether any investor in the hedge fund is an executive officer or director of a public company or covered non-public company, or if any investor is materially supported by such an executive officer or director.  (All of these terms are discussed in detail in this article.)  However, such information is typically only available to the hedge fund manager.  Therefore, to comply with Rule 5131, broker-dealers – including prime brokers – will ask hedge fund managers for relevant investor information.  In order to provide broker-dealers with sufficient responses, hedge fund managers will have to collect such information from their existing and new investors.  The primary administrative and compliance issue here is that the information required to comply with Rule 5131 is not information that hedge fund managers typically have collected from investors.  As a result, hedge fund managers and other industry participants have been wondering what the scope of required information is, how to collect it, how frequently and what to do with it.  See “New FINRA IPO Allocation Rule Will Require Hedge Funds That Invest in ‘New Issues’ to Revisit Their Compliance Policies and Procedures and Fund Structures,” Hedge Fund Law Report, Vol. 4, No. 5 (Feb. 10, 2011).  With the goal of addressing these questions and more generally helping hedge fund managers comply with their obligations under Rule 5131, this article discusses: the mechanics of Rule 5131, including a discussion of the various defined terms in the rule; the relevance of hedge fund size and strategy in the application of Rule 5131; remedies that may be imposed on hedge fund managers for violations of Rule 5131; how hedge fund managers may revise their subscription documents, questionnaires and annual certifications; the viability and advisability of a negative consent process; the extent to which hedge fund managers are required to investigate investor representations regarding corporate affiliations; an investor’s duty to update representations regarding corporate affiliations; how beneficial ownership is measured for Rule 5131 purposes; the categories of relationships between a broker-dealer and a company that may implicate Rule 5131; and how to calculate the beneficial ownership of a fund of funds in an underlying hedge fund where an investor in the fund of funds is a restricted person under Rule 5131.  This article concludes with an analysis of the elements of two sets of questionnaires and annual certifications provided to the Hedge Fund Law Report by two leading law firm hedge fund practice groups.  We provide a step-by-step analysis of what is included in these forms.  The purpose of this analysis is to enable hedge fund managers to draft new questionnaires and certifications or to revise existing questionnaires and certifications to reflect best practices.