Is Outside Employment Permitted by FINRA?

Under its outside business activities rule, the Financial Industry Regulatory Authority (FINRA) generally forbids persons associated with a FINRA member organization in any registered capacity from either being employed or accepting compensation from any other person as a result of any business activity outside the scope of the relationship with his or her member firm.  Pursuant to Rule 3270, which replaced retired Rule 3030, outside employment is prohibited unless the associated person has provided written notice to the member, in a form specified by the member.

Once a member has received written notice of an associated business activity, the member shall consider whether the proposed activity will:

(1) interfere with or otherwise compromise the registered person’s responsibilities to the member and/or the member’s customers or

(2) be viewed by customers or the public as part of the member’s business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered

Based on this review, the member should evaluate imposing limitations on the activity, including the possibility of forbidding it.  The member should also consider whether the proposed activity is better characterized as a private securities transaction subject to Rule 3280.  Members who receive notice pursuant to Rule 3270 should keep a record of their own compliance with these obligations and preserve them in accordance with FINRA rules.

Rule 3270 does not prevent an associated person from engaging in passive investments and transactions in accordance with Rule 3280.