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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<img style="max-width: 100%;height: auto" width="400" height="267" src="https://www.thregupdate.com/wp-content/uploads/sites/1016/2025/01/GettyImages-1391875989.jpg" class="attachment-lxb_af_3_of_4-wide size-lxb_af_3_of_4-wide wp-post-image" alt="" loading="lazy" />
			FINRA has <a href="https://www.finra.org/rules-guidance/notices/25-05#notice">requested comments</a> on a proposed rule to simplify and ease members&rsquo; duties related to outside activities of associated persons. The rule would merge existing Rules <a href="https://www.finra.org/rules-guidance/rulebooks/finra-rules/3270">3270</a> and <a href="https://www.finra.org/rules-guidance/rulebooks/finra-rules/3280">3280</a>, and cover fewer outside activities and transactions. However, the proposed rule keeps the status quo for outside investment adviser (&ldquo;IA&rdquo;) activity at an unaffiliated IA, where a member must still supervise and maintain records for an associated person&rsquo;s involvement in such activities for selling compensation.
Current Rules on Outside Activities
Currently, members have two sets of obligations for outside activities, depending on what they are and who does them. Rule 3270 forbids a registered person from working for or expecting compensation from anyone else for any business activity outside their employment with a member, unless they notify the member in writing first. Passive investments and activity under Rule 3280 are exempt. The member must check if the activity could interfere with the registered person&rsquo;s duties, appear to be part of the member&rsquo;s business, or be securities activity under Rule 3280. A member can limit or prohibit the registered person&rsquo;s participation in the activity and must keep records as required by <a href="https://www.law.cornell.edu/cfr/text/17/240.17a-4">Rule 17a-4(e)(1)</a>.
Rule 3280 applies to associated persons and any &ldquo;private securities transaction&rdquo; (&ldquo;PST&rdquo;). A PST is any securities transaction outside the person&rsquo;s employment with the member, with few exceptions. The associated person must notify the member in writing of any PST. If the PST does not involve selling compensation to the associated person, the member need only acknowledge the notice and decide whether to limit the person&rsquo;s participation in the PST. If the PST involves selling compensation to the associated person, the member must approve, limit, or reject the participation and, if approved, supervise the participation and maintain books and records of the transaction. 
Under current rules and guidance, IA activity is usually a PST, whether at an affiliated or unaffiliated IA firm. So, if an outside IA activity has selling compensation for the associated person&mdash;like AUM-based compensation&mdash;and the person does more than recommend the transaction (e.g., places the order), Rule 3280 applies. This creates an extra burden for dually registered members because even affiliated IA activity is treated as &ldquo;away&rdquo; from the member for purposes of Rule 3280. It also requires members to obtain transaction records from unaffiliated IAs over whom they have little control or influence.
Proposed Rule 3290
The proposed rule eliminates most outside activities, applying only to &ldquo;investment-related activity,&rdquo; defined by &ldquo;financial assets, including securities, crypto assets, commodities, derivatives,&rdquo; etc. and including broker-dealer or IA activity. The rule also excludes securities transactions among family members (without selling compensation) and some personal investments (Rule 3210 transactions, non-securities investments, or residential real estate transactions). Importantly, the rule also excludes &ldquo;non-broker-dealer activity for a member or its affiliate&rdquo; including IA activity at a dual member&mdash;easing the burden under Rule 3280.
The proposed rule mostly follows Rules 3270 and 3280, using the same distinction between registered persons and associated persons. For investment-related activity &ldquo;not in connection with a securities transaction,&rdquo; a registered person must give written notice and the member must make the determinations as under Rule 3270. For investment-related activity that is &ldquo;in connection with a securities transaction,&rdquo; an associated person must give written notice and, as under Rule 3280, the member must decide whether to approve it and, if approved, supervise and maintain books and records for the transaction&mdash;except for IA activity at an affiliated IA firm, which is excluded, as noted above. The rule also standardizes the member&rsquo;s assessment criteria to those in Rule 3270, regardless of whether the activity is &ldquo;in connection with a securities transaction.&rdquo;
FINRA&rsquo;s call for comments includes a useful <a href="https://www.finra.org/sites/default/files/2025-03/OAR_Regulatory_Notice_Attachment_B.pdf">flowchart</a>, illustrating how the proposed rule may apply, and several <a href="https://www.finra.org/sites/default/files/2025-03/OAR_Regulatory_Notice_Attachment_C.pdf">hypotheticals</a> illustrating differences between the old rules and the proposed rule.
Comments on the proposed rule may be submitted online, by mail, or by email through May 13, 2025.

FINRA Proposes New Rule to Streamline Outside Business Activity Obligations

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