FINRA has proposed a significant restructuring of its rules governing outside business activities and private securities transactions by broker-dealer personnel. The proposal would consolidate FINRA Rules 3270 (Outside Business Activities) and 3280 (Private Securities Transactions) into a single, modernised framework under proposed Rule 3290 (Outside Activities Requirements).
FINRA’s stated goal is to narrow regulatory focus to higher-risk, investment-related activities, reducing unnecessary compliance burdens while strengthening investor protection.
Background: Why FINRA Is Acting Now
Under the current regime:
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Rule 3270 requires registered persons to provide prior written notice for any compensated activity outside their firm role, regardless of risk or relevance to securities activity.
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Rule 3280 governs private securities transactions, requiring firm approval and supervision when selling compensation is involved.
These rules have long been criticised for generating excessive reporting around low-risk, non-investment activities—such as small side businesses or nonprofit roles—while diverting compliance resources from genuinely risky conduct.
FINRA flagged both rules for reform during a retrospective review in 2017 and sought industry feedback again in March 2025, paving the way for the current proposal.
What the Proposal Changes
A Single, Risk-Focused Rule
Proposed Rule 3290 would replace both existing rules and reframe oversight around “investment-related activity.” This approach is designed to eliminate what FINRA describes as compliance “white noise” while preserving supervision where investor harm is more likely.
Investment-related activity would broadly include activities involving:
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Securities and crypto assets
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Commodities, derivatives, futures, and swaps
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Currency, banking, real estate, and insurance
Key Clarifications and Exclusions
The proposal provides clarity in several areas that previously generated inconsistent interpretations:
Included under Rule 3290
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“Buying away” through personal investments involving securities
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Business ventures related to crypto assets (e.g., promoting or selling crypto outside the firm)
Excluded from Rule 3290
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Activities performed on behalf of the firm or its affiliates (including advisory activity for affiliated RIAs)
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Personal transactions in non-security crypto assets (e.g., bitcoin)
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Personal transactions involving a primary residence and up to two secondary homes under specified conditions
New Definitions and Reporting Structure
The proposal introduces updated terminology:
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Outside activities → investment-related activity not involving a securities transaction (registered persons only)
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Outside securities transactions → investment-related activity involving a securities transaction (all associated persons)
Prior written notice would still be required, but only for activities meeting the new investment-related threshold.
Firm Review and Supervision Obligations
Under Rule 3290, firms would assess both outside activities and outside securities transactions using harmonised criteria, including whether the activity:
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Involves the firm’s customers
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Interferes with the individual’s responsibilities to the firm
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Could reasonably be perceived as part of the firm’s business
Firms would retain discretion to approve, condition, or prohibit activities. Where selling compensation is involved in an outside securities transaction, firms must continue to approve the activity, record it on firm books, and supervise it as if conducted on the firm’s behalf—mirroring current Rule 3280 obligations.
Codifying Existing Interpretive Positions
The proposal would formally codify several long-standing FINRA staff interpretations, including treatment of:
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Portfolio managers and investment committee members
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Work performed under third-party contracts with the firm
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Certain activities conducted at banks or financial institutions
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Allocation agreements for dual-associated persons
Practical Impact and Open Questions
If adopted, Rule 3290 could materially reduce compliance burdens tied to low-risk, non-investment activities and allow firms to refocus supervision on conduct that presents genuine investor or reputational risk.
However, the proposal does not alter registered persons’ obligation to disclose “other business” activities on Form U4, which remains broader in scope. FINRA has acknowledged this mismatch and stated it will seek coordination with the SEC and state regulators, but firms may still need to manage dual reporting regimes—potentially limiting the proposal’s burden-reduction benefits.
What Happens Next
Once published in the Federal Register, the proposal will be subject to public comment and possible amendments. A final SEC decision is expected by Q3 2026. If approved, FINRA will announce an implementation timeline through a Regulatory Notice.
Bottom Line
FINRA’s proposed Rule 3290 represents a meaningful shift toward risk-based supervision of outside activities, aligning regulatory effort with actual investor risk. While operational details—particularly around Form U4 overlap—remain unresolved, the proposal signals FINRA’s intent to modernise long-standing rules that no longer reflect how brokerage professionals work today.