On September 29, 2010, the SEC approved new FINRA Rule 5131, New Issue Allocations and Distributions.  Paragraph (b) of Rule 5131 generally prohibits “spinning” – that is, the practice in which FINRA members (substantially all SEC-registered broker-dealers) allocate new issues to officers and directors of current, and certain past or prospective, investment banking clients.  As FINRA noted in Regulatory Notice 10-60, “[b]ecause such persons are often in a position to hire members on behalf of the companies they serve, allocating new issues to such persons creates the appearance of impropriety and has the potential to divide the loyalty of the agents of the company (i.e., the executive officers and directors) from the principal (i.e., the company) on whose behalf they must act.”  The rule will become effective on May 27, 2011.  For hedge funds that invest in new issues, Rule 5131(b) presents a range of compliance and structuring challenges.  Although the rule directly governs the relationships between broker-dealers and corporate officers and directors, hedge funds often serve as the vehicle through which such corporate officers and directors invest in new issues.  Therefore, the brunt of the compliance burden of Rule 5131(b) will, in many cases, devolve to hedge fund managers.  The purpose of this article is to help hedge fund managers design or recalibrate their compliance programs to accommodate new Rule 5131(b), and to highlight some fund structuring options that may be relevant.  Specifically, this article discusses: the general rule imposed by Rule 5131(b); the specific prohibitions included in Rule 5131(b); the de minimis exception to the prohibitions (which is relevant for hedge funds); and – most importantly – compliance and structuring strategies for hedge fund managers.