Proposed FINRA Rule 3290 would replace and consolidate Rules 3270 (Outside Business Activities) and 3820 (Private Securities Transactions). The new rule would significantly change how FAs and firms deal with investment-related outside activities and outside securities transactions. Proposed Rule 3290 would leave the current prior notice, assessment, and supervision structure largely intact. However, it would narrow coverage to higher-risk, investment-related OBAs, while apparently excluding other low-risk categories. Proposed Rule 3290 defines an activity of an outside “unaffiliated” investment advisor as an “outside activity.” This eliminates the expectation that FAs supervise and maintain books and records for unaffiliated investment adviser business.
Perspectives and Potential Flags Regarding Compliance and Implementation
Under Proposed FINRA Rule 3290, “investment-related activity” includes activities relating to financial assets, securities, crypto assets, commodities, derivatives, banking, real estate, or insurance. It also includes an FA’s personal securities transactions conducted away from the firm (at times referred to as “buying away”). However, Rule 3290 excludes transactions in accounts that are known to the firm or otherwise delineated in Rule 3210.
FAs must give prior written notice of, and firms must confirm, investment-related OBAs. FAs must also give prior written notice of outside securities transactions. The firm must confirm if the activity involves the FA’s customer, whether it interferes with responsibilities, and whether it may be part of the firm’s business.
For an FA’ s investment‑related outside activity, the firm must consider whether to impose conditions, limitations, or a prohibition. However, buti is not required to expressly approve or supervise the activity. However, for an FA’s outside securities transaction without selling compensation, the firm must provide prompt written acknowledgment and may impose conditions on the activity. But again, the firm is not required to supervise.
For an outside securities transaction with selling compensation, the firm must decide whether to approve (with or without conditions) or disapprove. The firm must also put its determination in writing. Upon approval, record the transaction and supervise it as if it were executed on behalf of the firm.
FINRA has revised the assessment factor so that firms analyze whether the activity involves the customer of the registered person and whether customers or the public would view the activity as part of the firm’s business. All activity on behalf of an affiliate is excluded from Proposed Rule 3290. For non-affiliates, activity performed by virtue of a contract with the member is treated as within the scope of employment and not as an outside activity.
Exclusions Regarding Crypto, Real Estate, and Personal Investments in Non-Securities
FAs’ personal investments would no longer be considered an OBA. Proposed Rule 3290 expressly excludes personal investments in non-security crypto, meaning no notice or prior approval is required. If a crypto asset is a security, personal transactions would require prior written notice and acknowledgment. Conversely, absent selling compensation, would not require approval.
Under Proposed FINRA Rule 3290, activities conducted on behalf of a firm’s affiliate by personnel associated with the firm are excluded, recognizing that members can implement controls across business lines.
In addition, the purchase, sale, rental, or lease of a primary home and up to two secondary homes are excluded. They must be owned in specified ways, including through entities or trusts controlled by the FA and immediate family. FINRA views these personal real estate transactions as low risk from the perspective of customer confusion and firm exposure.
If you have questions about a current OBA or how the proposed new rule may impact your investments or disclosure requests, reach out to the FINRA lawyers at the Rogge Dunn Group. The Rogge Dunn Group is an experienced FINRA law firm, including a FINRA-licensed arbitrator. They are extremely well-versed in the ins and outs of FINRA.