FINRA adopts Rule 3290 to replace its outside business and private securities transaction rules

FINRA has adopted a new Rule 3290 on outside activities, which will replace Rule 3270 on registered persons’ outside business activities and Rule 3280 on associated persons’ private securities transactions. The regulator announced the change in Regulatory Notice 26-20 on 26 October; the new rule takes effect on 25 October 2027.

What the new rule does

Rule 3290 is part of FINRA Forward, the regulator’s programme to modernise its rules and reduce unnecessary burdens on member firms while keeping core investor protections. It keeps the existing split between two kinds of activity:

• An outside activity is an investment-related activity outside a registered person’s relationship with their firm that is not connected with a securities transaction. The person must give the firm prior written notice describing the activity and their role.
• An outside securities transaction is investment-related activity connected with a securities transaction. Any associated person must give prior written notice, and where selling compensation is involved must also obtain the firm’s prior written approval.

“Investment-related activity” is defined as activity pertaining to financial assets, including securities, crypto assets, commodities, derivatives such as futures and swaps, currency, banking, real estate and insurance. Activities with no investment link, such as refereeing sports games, driving for a car service or bartending at weekends, no longer have to be reported under the rule.

When a firm receives a notice, it must assess whether the activity is properly characterised, whether it involves a customer of the person (a new factor), whether it would compromise the person’s responsibilities to the firm or its customers, and whether customers or the public would see it as part of the firm’s business.

Investment advisory work

The biggest change concerns work at an unaffiliated investment adviser registered with the SEC or a state. Guidance from the 1990s treated some of this work as private securities transactions that the broker-dealer had to supervise and record. Under Rule 3290 it becomes an outside activity: the person must give notice and the firm must carry out its assessment, but the firm no longer has to supervise or keep records of the advisory activity itself. Firms can still impose conditions, and must supervise compliance with any they impose.

What happens next

The rule text and a flowchart are attached to the notice. Firms have until 25 October 2027 to adapt their procedures, when the guidance in Notices to Members 94-44 and 96-33 on outside advisory activity will be superseded.