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That's a totally weird rule, I've never encountered it here.
Usually rules will involve low/realcap mags and total ammo restrictions, with LMGs having access to higher capacity mags (boxes/drums) and higher total ammo count -- albeit there are specific rules as to what can be accepted as a LMG, i.e., an M4 with a drum is not an LMG.
The end result is that if you want to blow your limited ammo away in full auto you can, but you'll need to reload more frequently and you'll run out of ammo faster (I've even seen some events where there were rules for resupply, so when you ran out of ammo it wasnt as easy as going back to camp and reloading).
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