The Financial Industry Regulatory Authority (FINRA) has proposed a new rule, FINRA Rule 3290 – Outside Business Requirements (Proposed Rule), to simplify and reduce unnecessary regulatory burdens related to the outside activities of associated persons within member firms related to outside business activities (OBAs) and private securities transactions (PSTs).
This proposal, outlined in Regulatory Notice 25-05, results from FINRA’s retrospective review of the existing OBAs and PSTs rules—FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person). The new rule would replace both rules with a single, more efficient regulation that reduces complexity while maintaining investor protections.
Key Changes
Consolidation of Rules – The proposal merges Rules 3270 and 3280 into one rule, reducing redundancy and simplifying compliance. While the Proposed Rule addresses the non-securities business activities and securities transactions that are outside the regular scope of individuals’ employment with a member, it narrows the focus to investment-related activities to reduce unnecessary burdens while maintaining the core investor protections of the existing rules.
Focus on Investment-Related Activities – The Proposal focuses on outside investment-related activities that may pose a greater risk to the investing public and members, and as such, the Proposed Rule would narrow reporting obligations to investment-related activities that pose potential risks to investors and firms. For clarity and ease of reference, FINRA refers to non-securities business activities outside the regular scope of individuals’ employment with a member as “outside activities” and to securities transactions outside the regular scope of individuals’ employment with a member as “outside securities transactions.”
- “Non-investment-related activities” (e.g., refereeing sports games, ride-sharing, part-time non-financial related activities) would no longer require disclosure.
- “Investment-related activity” includes:
- Activities pertaining to financial assets, including securities, crypto assets, commodities, derivatives (such as futures and swaps), currency, banking, real estate or insurance.
- Acting as or being associated with a broker-dealer (BD), issuer, insurance agent or company, investment company, IA, futures commission merchant, commodity trading advisor, commodity pool operator, municipal advisor, futures sponsor, bank, savings association or credit union.
- Includes personal securities transactions (sometimes referred to as “buying away”), other than transactions in accounts that are known to the member under, or otherwise delineated in, Rule 3210 (e.g., securities held at other members, as well as transactions in certain securities, such as mutual funds, Section 529 plans and variable annuities).
Exclusions – The Proposed Rule contains specific exclusions to eliminate unnecessary regulatory burdens, based on the recognition that certain activities pose minimal risks to customers and member firms. These exclusions prevent firms from expending unnecessary resources on activities that do not require extensive oversight, and include:
- Non-Broker-Dealer (Non-BD) activities conducted on behalf of a member or its affiliate by an associated person’s (including a registered person’s) as such activities are not considered outside activities because they fall under the broader compliance framework of the member or its affiliate.
- Outside securities transactions among immediate family members for which there is no selling compensation.
- Securities transactions subject to Rule 3210 which are held by another FINRA member and include mutual funds, Section 529 plans, and variable annuities, as these transactions already fall under existing monitoring and reporting obligations.
- Personal investments in non-securities and the purchase, sale, rental or lease of a main home or dwelling unit or personal-use rental property, as defined under IRS regulations.
Clarifications – The Proposal provides additional clarifications with respect to member firms’ obligations regarding OBAs and PSTs of their associated persons.
The Proposal clarifies members’ obligations in several areas.
- Portfolio Managers & Investment Committee Members – Associated persons would still need to provide prior written notice and receive prior written approval for such activity; however, if the member approves the activity, it would not be required to supervise and maintain records for an associated person who is acting as a portfolio manager or investment committee member for (i) registered investment companies, (ii) unregistered investment companies, (iii) business development companies, (iv) real estate investment trusts and (v) entities that are recognized as tax exempt. The exception to the above would be where the associated person is selling such entities’ shares for selling compensation, in which case the member firm would be required to supervise those activities.
- Allocation of Regulatory Obligations – If an associated person is engaged in an outside securities transaction for selling compensation, and is affiliated with more than one member firm, the firms may enter into a written allocation agreement. This agreement would allow the firms to determine and allocate responsibility for regulatory compliance, including supervision and recordkeeping.
- Outside IA Activity – The historical guidance remains unchanged, meaning that if an associated person does more than recommend a securities transaction, such as placing or executing an order, or if the associated person receives asset-based or performance-based fees for IA services (which is considered “selling compensation”), the activities qualify as “participation in” a PST, which requires firm supervision and recordkeeping.
Supervisory Obligations
Under the Proposed Rule, member firms must assess and oversee outside activities and securities transactions of their registered and associated persons using a standardized framework.
Key Assessments – Upon receiving written notice of a registered person’s outside activity or an associated person’s outside securities transaction, members must assess whether:
- The activity is properly classified (e.g., distinguishing between an outside activity, an outside securities transaction, or one involving selling compensation).
- It involves the firm’s customers and may pose potential conflicts.
- It interferes with or compromises the individual’s responsibilities to the firm or its customers.
- It may be perceived by customers or the public as part of the firm’s business, considering the nature and manner of the activity.
- These evaluation criteria align with existing FINRA Rule 3270 for outside business activities, with the new addition requiring firms to determine whether the activity involves their customers.
Additional Factors to Consider – While Rule 3280 does not currently include these explicit factors for private securities transactions, they will need to be considered under the Proposed Rule.
- For a Registered Person’s Outside Activity – The firm must determine whether to impose conditions, limitations, or prohibit the activity where necessary; however, no formal approval or acknowledgment is required.
- For an Associated Person’s Outside Securities Transaction (Not for Selling Compensation) – The firm must acknowledge receipt of the notice in writing and may impose conditions if deemed necessary, but approval is not required.
- For an Associated Person’s Outside Securities Transaction (For Selling Compensation) – The firm must review and determine whether to approve, approve with conditions, or disapprove of the transaction, and the firm must notify the individual in writing of its decision.
Request for Comments on Proposed Rule 3290
The Proposed Rule represents a significant step in modernizing and reassessing the supervision requirements for member firms and their registered personnel. By consolidating existing rules into a more efficient framework, the proposal seeks to streamline compliance while ensuring investor protections remain intact.
Given the potential impact of this rule, FINRA encourages all stakeholders to review the proposal and submit their comments, concerns, and feedback via its website, email, or mail.
The deadline for submitting comments is May 13, 2025.