The U.S. initial public offering (IPO) market has entered 2026 with substantial momentum. In 2025, approximately 202 companies with a market capitalization of more than $50 million priced IPOs, which was up from 150 companies pricing IPOs in 2024. Market participants are anticipating an even more active year as we progress through 2026, including highly anticipated IPOs from SpaceX and expected IPOs from AI and digital infrastructure companies, including Databricks, Anthropic, and OpenAI.
With the intensifying pace of IPO activity, we write to remind our clients who are SEC-registered investment advisers of their obligations under Rule 204A-1 of the Advisers Act. The rule requires every registered investment adviser to establish, maintain, and enforce a written code of ethics that, at a minimum, includes standards of business conduct reflecting fiduciary obligations, requirements to comply with applicable federal securities laws, provisions for personal securities reporting, and procedures for reporting code violations.
Of particular relevance to the current market environment, Rule 204A-1(c) requires that an adviser's code of ethics mandate that all "access persons" obtain prior approval before directly or indirectly acquiring beneficial ownership of any security in an IPO or a limited offering. An "access person" is broadly defined to include any supervised person who has access to nonpublic information regarding clients' purchases or sales of securities or who is involved in making securities recommendations to clients. If providing investment advice is the adviser's primary business, all directors, officers, and partners are presumed to be access persons.
The pre-clearance requirement is designed to help ensure that access persons do not misappropriate an investment opportunity that should first be offered to the adviser's eligible clients and that portfolio managers do not receive a personal benefit for directing client business or brokerage.
Rule 204-2(a)(13), as amended, further requires advisers to maintain records of all decisions approving access persons' acquisition of securities in IPOs and limited offerings for a period of five years. The SEC has historically taken enforcement action when codes of ethics failed to include IPO pre-clearance requirements or when access persons failed to obtain the requisite preapproval before purchasing ownership interests in IPOs and private offerings.
We encourage all advisory firm clients to take the following steps in light of current market conditions:
- First, confirm that your code of ethics includes a clear, enforceable IPO pre-clearance requirement that applies to all access persons, including those with household or beneficial ownership relationships.
- Remind all supervised persons of their obligations to submit pre-clearance requests before accepting any IPO allocation from a brokerage firm.
- Verify that your compliance technology systems are capable of processing pre-clearance requests in a timely manner, particularly given the compressed timelines associated with major offerings.
- Document all approval or denial decisions, along with the supporting rationale, and retain those records for the required five-year period.
As the IPO pipeline strengthens, we have also observed a notable and growing trend of investment advisers asking us to form special purpose vehicles (SPVs) to provide their clients with access to pre-IPO and IPO investment opportunities. Given the continued and growing interest in the use of SPVs as a means of accessing private market investments, these structures have become increasingly mainstream.
An SPV allows investors to gain economic exposure to private, pre-IPO companies through indirect ownership by pooling capital into a single legal entity that acquires shares in a target company. At its most basic level, a sponsor forms an entity that acquires shares and then offers interests in that entity to investors indirectly through an investment in the SPV. These vehicles are typically structured as Delaware LLCs or limited partnerships and are offered under Regulation D of the Securities Act of 1933.
For investment advisers, SPVs present a mechanism to aggregate client capital and obtain IPO allocations that individual clients might not otherwise be able to access due to high minimum investment requirements or limited direct connections to underwriters. While convenient, SPV structures come with their own compliance obligations, including private placement obligations under the Securities Act and allocation considerations with respect to an adviser's clients. In addition, they may present certain conflicts of interest that must be disclosed under the Advisers Act, as well as other regulatory issues.
The combination of a robust IPO pipeline and continued market appetite for technology and AI-driven companies creates both opportunity and compliance risk. Registered investment advisers should take proactive steps now to review and reinforce their codes of ethics, ensure that pre-clearance procedures are functioning effectively, and carefully evaluate the compliance implications of any SPV structures being utilized to access IPO opportunities on behalf of clients.
The Baker Donelson Fund Formation and Investment Management Group stands ready to assist with any questions regarding these obligations. For specific questions regarding these matters, please contact Paul J. Foley, Cole Beaubouef, Kiki Scarff, or John M. Faust.
Ana Marin Higuita, a paralegal at Baker Donelson, contributed to this article and is not admitted to the practice of law.