On February 26, 2018, the U.S. Financial Industry Regulatory Authority (FINRA) proposed new FINRA Rule 3290 (the Proposed Rule) that will greatly simplify a member’s obligation to supervise its personnel engaged in both investment advisory and broker-dealer activities and clarify the treatment of “dual-hatted” personnel who perform services both for the member and a non-broker-dealer affiliate (such as an affiliated investment adviser, a bank or an insurance company). The Proposed Rule will consolidate and replace current FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person) and, according to FINRA, is intended to reduce unnecessary burdens and confusion while strengthening investor protections relating to outside activities.
In addition to simplifying and clarifying a member’s supervisory obligations regarding the outside business activities of registered persons, the Proposed Rule maintains existing notice requirements and clarifies FINRA’s expectations regarding the review of a registered person’s outside, investment-related activities. We set forth a summary of the Proposed Rule and an analysis of its potential implications below.
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