FINRA Advances Overhaul of Outside Business Activity Rules to the SEC
From the desk of Jim Eccleston at Eccleston Law
FINRA formally has advanced its proposed overhaul of outside business activity (OBA) regulations to the Securities and Exchange Commission. According to AdvisorHub, FINRA also issued a notice confirming the SEC filing, which triggers a 90-day public comment period before the SEC decides whether to approve the rule.
The proposal would replace existing Rules 3270 and 3280 with a single, consolidated Rule 3290. As reported by AdvisorHub, FINRA designed the change to streamline regulatory oversight and reduce compliance obligations tied to low-risk, non-investment-related activities. Under the proposal, brokers no longer would need to report or seek firm approval for activities such as refereeing sports, driving for a car service, or bartending on weekends.
The rule also would permit brokers to engage in certain activities, including securities transactions, without firm approval when no compensation is involved. FINRA also would exclude personal real estate transactions, such as buying, selling, or renting a home, from reporting requirements, as reported by AdvisorHub.
FINRA stated that the revised framework would allow firms to concentrate supervisory resources on higher-risk conflicts. Those risks may include selling away and the promotion of products such as crypto assets, fixed annuities, commodities, or private placements. According to AdvisorHub, this effort follows earlier attempts by FINRA to modernize OBA regulation. In 2018, FINRA proposed narrowing the definition of outside business activities and easing supervisory and recordkeeping requirements related to brokers’ unaffiliated registered investment advisers.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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