FINRA Proposes Changes to Reporting Outside Business Activities

FINRA Regulatory Notice 25-05, issued on March 14, 2025, proposes consolidating Rules 3270 and 3280 into a single rule—tentatively titled Rule 3290—to streamline and reduce unnecessary burdens regarding associated persons’ outside activities. The comment period for this proposal ends on May 13, 2025.

Key Points of the Proposal

• Consolidation of Rules: The proposal aims to merge FINRA Rules 3270 (Outside Business Activities of Registered Persons) and 3280 (Private Securities Transactions of an Associated Person) into a single rule, simplifying the regulatory framework.
• Focus on Investment-Related Activities: The new rule would narrow the scope to investment-related activities, reducing the need for reporting non-investment-related outside business activities.
• Prior Written Notice: Associated persons would still be required to provide prior written notice to their member firm before engaging in any outside investment-related activities.
• Supervisory Obligations: Member firms would be obligated to assess the disclosed activities to determine if they interfere with the associated person’s responsibilities or could be perceived as part of the firm’s business.

Feedback

• Support for Simplification: Many commenters appreciate the effort to reduce regulatory burdens by focusing on investment-related activities.
• Concerns About Definitions: Some stakeholders, like John, suggest refining the definition of “investment-related activities” to avoid capturing low-risk activities that may not warrant strict oversight.
• Privacy and Oversight Issues: James A. Beindorf raises concerns about the potential for the proposed rule to infringe on client privacy, especially regarding investment advisors’ obligations to share client information with unaffiliated broker-dealers.
• Crypto Asset Ownership: Peter Sweeney highlights that the rule could impact financial advisors who own crypto assets, potentially forcing them to divest or face termination if their broker-dealers do not approve such holdings.

For more detailed information and to submit comments, please visit the official notice: FINRA Regulatory Notice 25-05.

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