FINRA has submitted a proposed rule change to the Securities and Exchange Commission (SEC) that would update its regulations concerning outside business activities (OBAs) and private securities transactions (PSTs). The new proposal, FINRA Rule 3290, is part of FINRA’s ongoing efforts to modernize its rules and is intended to reduce unnecessary burdens while maintaining essential investor protections.
According to the filing, “the purpose of the proposed rule change is to ‘reduce unnecessary burdens while maintaining core investor protections.’” The updated rule would focus on “investment-related activities,” which are seen as more likely to present risks for member firms and investors.
Currently, OBAs and PSTs are governed by FINRA Rules 3270 and 3280. These rules require registered persons or those associated with FINRA members to provide written notice before engaging in certain business or securities activities outside their primary employment. Member firms must then evaluate whether these activities could interfere with their responsibilities or be perceived as part of the firm’s business. For PSTs, additional supervision may be required if compensation is involved.
The new proposal introduces several changes. Most notably, it narrows the scope so that only “investment-related” outside activities fall under regulation. Investment-related activity is defined as “pertaining to financial assets, including securities, crypto assets, commodities, derivatives (such as futures and swaps), currency, banking, real estate or insurance.” This adjustment allows firms to concentrate compliance resources on higher-risk areas.
Other exclusions have also been introduced. For example, transactions involving immediate family members without selling compensation would not be regulated under the new rule. Certain personal real estate transactions—such as buying or renting a main home and up to two secondary homes—would also be excluded if they meet specific requirements. Additionally, any activity performed on behalf of a member firm or its affiliate would not fall under the rule.
While current rules focus only on securities transactions for PSTs, the new proposal clarifies that it does not apply to personal investments in non-securities. Form U4 disclosures—which currently require broader reporting of OBAs—are noted in the filing as extending beyond what is covered by this proposed change. FINRA stated it “would endeavor to work with the SEC and states to harmonize the requirements where appropriate.”
The proposal also addresses investment advisory activities by clarifying that such work performed for unaffiliated investment advisers registered with either the SEC or state regulators would be considered an outside activity rather than an outside securities transaction. This means member firms would not need to supervise these advisory services under Rule 3290.
FINRA acknowledged previous guidance had led to confusion: “In its rule filing, FINRA acknowledged that its prior guidance ‘caused significant confusion and practical challenges.’” In response to feedback received during comment periods—including Regulatory Notice 25-05—the organization revised its approach regarding recordkeeping and supervisory responsibilities for unaffiliated investment advisory activity.
Additional aspects of existing interpretive positions are codified in this proposal. Portfolio managers working for certain entities must still notify their member firm about outside roles but will not trigger additional supervision unless they receive selling compensation from those activities. Regulatory responsibilities can now be allocated among multiple member firms through written agreements when individuals are associated with more than one firm.
The proposed rule also clarifies how Gramm-Leach-Bliley Act (GLBA) provisions and Regulation R apply within these contexts—especially concerning networking arrangements between banks and broker-dealers—and when such activities should be treated as internal versus external obligations subject to different levels of oversight.
Finally, amendments allow member firms seeking exemptions from Rule 3290’s requirements to request relief under Rule 9610 when justified by specific circumstances: “member firms may request exemptive relief where ‘the specific facts justify an exemption.’”
The SEC will review FINRA’s proposal before any changes take effect.