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Regulation and Compliance > Federal Regulation > FINRA

FINRA Seeks Comments on Outside Business Activities, Private Securities

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Continuing the retrospective review of its rules, the Financial Industry Regulatory Authority requested comment Monday on its rules governing outside business activities and private securities transactions.

The review is part of the FINRA360 initiative, a comprehensive review of the self-regulator’s operations and programs.

FINRA is seeking feedback from member firms on rules governing broker-dealer employees’ business and securities activities carried out away from their firm – activities that are outside the regular course or scope of their employment with the firm.

These rules, FINRA says, “were designed to protect investors from potentially problematic or risky activities that are unknown to the firm but could be perceived by the investing public as either part of the firm’s business or having the firm’s imprimatur. In addition, the rules protect firms from reputational or litigation risks when employees engage in business and securities activities outside of the firm.”

FINRA wants feedback on whether the rules have effectively addressed the problems they were intended to mitigate, as well as the economic impact of the rules and the challenges to complying with them.

Comments are due by June 29.

“Regularly reviewing significant rules to ensure they remain effective at protecting investors in an efficient manner is a key priority that aligns with our FINRA360 initiative,” said FINRA President and CEO Robert Cook, in a Monday statement. “Successful self-regulation requires continuous renewal and improvement. Meaningful dialogue with stakeholders is essential to that process.”

FINRA issued three requests for comments in mid-April on the capital formation process, proposed amendments to rules for underwriting arrangements and a proposed safe harbor from equity and debt research rules for desk commentary.


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