FINRA streamlines Outside Business Activities oversight

CFTC hit the commodity futures trading industry with $413 million in sanctions 2017
December 28, 2017
FINRA AND the NASAA watching cryptocurrency hype
January 10, 2018
Show all

FINRA streamlines Outside Business Activities oversight

FINRA streamlines Outside Business Activities oversight


At its pre-New Year meeting, the Board of the Financial Regulatory Authority (FINRA) authorized the organization to propose a rule that would streamline the range of outside business activities (OBAs) the firm has to monitor to focus on “investment-related actions.

Following a FINRA360 retrospective review of rules regarding registered representatives’ outside business activities and private securities transactions, the Authority’s Board approved publication of a Regulatory Notice seeking comment on a proposal that it says would reduce unnecessary burdens on brokerages while maintaining strong investor protections.

According to Robert Cook, FINRA’s President and CEO, the proposal still requires registered representatives to provide their member firms with prior written notice of a broad range of outside activities. But it also permits firms to reasonably assess a narrower set of activities that are investment-related. The intention, he says, it to enable firms to focus on outside activities that are more likely to raise potential investor-protection concerns.

The FINRA Board proposal also is intended to streamline the obligations by generally excluding from the rule a representative’s personal investments and work performed on behalf of a firm’s affiliate. It also is intended to eliminate supervisory obligations for non-broker-dealer outside activities, including investment advisory activities at an unaffiliated third-party adviser.

Mark Schoeff, Jr., reporting in Investment News, noted that the upcoming FINRA rule proposal would make it easier for brokerages to determine whether their representatives were engaging in harmful activities away from the office and also relieve firms of supervising a registered representative’s investment-advisory work at a nonaffiliated firm.

It also, he wrote, is expected to help regulators focus on truly harmful broker’s activities outside the office, rather than innocuous ones like church board membership.

What about FINRA Rule 3270?

It’s still out there. FINRA Rule 3270 continues to demand brokerages disclose, approve, and track members’ outside business activities. There is no upside to being the last to know what your people are up to. FINRA knows you cannot lock your people in their offices, so its intention is to help streamline the disclosure and approval process. Just like Patrina. Let’s talk about how you can keep your organization on the “straight and narrow” (no matter what FINRA throws at you) efficiently and cost-effectively. So let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.