FINRA to Revise Outside Business Activities Rules
From the desk of Jim Eccleston at Eccleston Law
The Financial Industry Regulatory Authority (FINRA) is seeking to overhaul its rules on outside business activities (OBA) and private securities transactions. As reported by AdvisorHub, FINRA's Board of Governors recently approved plans to publish a regulatory notice seeking public comments on a proposed new framework, referred to as the Outside Activities Requirements rule.
The proposed rule aims to modernize existing regulations, which many industry participants have criticized as outdated and difficult to comply with, especially now with the diverse business models of member firms.
Efforts to revise these rules have faced challenges. In May, FINRA’s Chief Legal Officer, Robert Colby, acknowledged prior reform attempts had stalled. One contentious issue is whether broker-dealers should be required to supervise the activities of dually registered brokers operating independent registered investment advisory (RIA) firms.
While FINRA does not oversee investment advisors, who are regulated by the SEC and state authorities, it does require broker-dealers to maintain some level of supervision and recordkeeping for their advisors' outside RIA activities. AdvisorHub also reports that the upcoming regulatory notice will provide specific details on the proposed rule changes and will invite public input, marking a significant step toward reforming its OBA framework.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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