Ed. Note: On May 5, FINRA clarified that its proposal would not require associated persons to report to and receive approval from their broker-dealers to personally purchase bitcoin, a beach house or insurance or maintain a bank account, and that these types of personal activities are, in fact, excluded from the rule.
Just when everybody thought crypto had entered the Age of Enlightenment, thanks to the strong support it's been given by the Trump administration, along comes FINRA with a proposed rule that, for FINRA-licensed reps and those dually licensed — would push crypto back into the Dark Ages of the Biden and Gensler regime. And the rule's impact would go far beyond cryptocurrency.
FINRA recently issued Regulatory Notice 25-05 and Proposed Rule 3290, and it’s surprising how little attention it’s gotten to date. Under this absurd proposal, any financial advisor who holds a FINRA license would be prohibited from personally investing in any crypto asset without first getting written approval from their broker-dealer. This requirement would also apply to the advisor's spouse, partner, children and anyone else living in the household.
Yeah, I know what you’re thinking. You don’t much care about crypto. But before you click away, consider this: The rule would also apply to any and all “investment-related activity” you engage in for your own personal use — and the proposal defines that to include not just “crypto assets” but also “securities, commodities, derivatives, currency, banking, real estate or insurance.”
Yup — this rule would require you to get written permission from your firm before you’d be permitted to purchase a beach house. You’d also have to get your firm’s approval to buy any type of insurance — life, auto, homeowners, health, and whatnot. It seems you’d even need your firm’s approval to open a bank savings account or buy a CD.
And yet, FINRA claims the rule would “reduce unnecessary burdens while maintaining core investor protections.” How does a rep pose a risk to the public by buying a house or insurance?
There is some good news, though: The proposal says that if the rule is implemented, there are some activities you’ll be able to engage in without telling the firm. These are “refereeing sports games, driving for a car service and bartending on weekends.” So, your Uber gig is safe!
In classic Orwellian style, FINRA calls this “a Proposal to Reduce Unnecessary Burdens and Simplify Requirements Regarding Associated Persons’ Outside Activities.” Nonsense! The proposal states that firms would have to assess whether a rep has “mischaracterized” an outside activity and determine whether that activity “will interfere with or otherwise compromise” the rep’s responsibilities to clients.
The firm would also have to approve each transaction in writing — so it won’t be enough to say you’re allowed to buy bitcoin for your personal Coinbase account; you’d have to get the firm’s prior written approval every time you wanted to buy or sell any digital asset — or, apparently, make a deposit or withdrawal to your bank account.
A 2025 Bitwise/VettaFi survey found that half of the nation's financial advisors personally own crypto. If this rule is enacted and you hold a FINRA license, you’ll have to inform your BDs of your crypto holdings and seek written permission to keep them. If permission is not obtained, you’ll be required to sell your crypto assets, transfer to another firm that permits your investments, or be fired.
FINRA is not merely shooting itself in the foot with this stupid proposal; it's hastening its own demise. If this rule is enacted as is, tens of thousands of registered reps will drop their FINRA licenses and switch to SEC jurisdiction as RIAs.
That will let you avoid FINRA's antiquated posture. You’ll be better off, and the only losers will be FINRA and the BDs it oversees.
FINRA is completely out of touch with the industry it purports to serve, and the overreach of this proposed rule cannot be overstated. Encourage your firm to express its opposition by writing to Jennifer Piorko Mitchell, Office of the Corporate Secretary, FINRA, 1700 K Street, NW, Washington, DC 20006. Hurry, because the public comment period ends May 13.
Ric Edelman is an author and founder of the RIA Edelman Financial Engines. He now leads the Digital Assets Council of Financial Professionals.
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