FINRA Statement to Correct Misinformation About FINRA’s Outside Activities Proposal

FINRA recently proposed amendments to streamline and reduce unnecessary burdens regarding existing requirements addressing outside activities of broker-dealers’ associated persons. Unfortunately, several recent statements published in news media mischaracterize FINRA’s proposal in a number of ways.

First, some statements incorrectly suggest that FINRA’s proposal imposes new reporting and approval obligations. It does not. There are no new reporting and approval requirements. The proposal does just the opposite — it significantly reduces reporting obligations that have been in existence for decades. FINRA is proposing to reduce these obligations to help broker-dealers focus on investment-related outside activities that present higher risks to investors and firms.

Second, some statements claim that the proposal would require associated persons to report to and receive approval from their broker-dealers to personally purchase Bitcoin, a beach house, insurance or even make a deposit or withdrawal at a bank. This claim is false. The proposal explains that these types of personal activities are, in fact, excluded from the rule.

Specifically, the proposed rule language states in the “exclusions” section that the rule shall not apply to an associated person’s personal investments in securities transactions subject to or delineated in Rule 3210 (which includes, among others, mutual funds, variable annuities, 529s and securities held at another broker-dealer), personal investments in non-securities (which would include Bitcoin), and the purchase, sale, rental or lease of a main home, dwelling unit or vacation home. In other words, associated persons would not need to report any such personal activities, much less receive approval from their firms, before engaging in them.

Third, some statements suggest that broker-dealers will have new obligations regarding outside investment adviser activities. These statements are false. The proposal does not change the existing obligations regarding unaffiliated investment adviser activity but explicitly asks whether FINRA should reduce or eliminate current obligations for unaffiliated investment adviser activity. In addition, the proposal eliminates such obligations for outside investment adviser activities conducted at a broker-dealer’s affiliate. The proposed rule states in the “exclusions” section that the rule shall not apply to an associated person’s activity on behalf of a member’s affiliate (which would include an investment adviser, insurance or banking affiliate).

To summarize:

1. The proposed rule contains no new reporting and approval requirements.
    
2. The proposed rule makes clear that non-securities personal activities are excluded from reporting and approval requirements.
    
3. The proposed rule does not impose on broker-dealers new obligations regarding outside investment adviser activities.

FINRA encourages interested parties to read Regulatory Notice 25-05 and provide feedback based on its content. The comment period ends on May 13, 2025.