Table of Contents
SERIES 7 | SERIES 65 | FINANCIAL REGULATION COURSES
FINRA Rule 3270 — Outside Business Activities of Registered Persons — prohibits any registered person from being an employee, independent contractor, sole proprietor, officer, director, or partner of another person, or from being compensated or having the reasonable expectation of compensation from any other person as a result of any business activity outside the scope of their relationship with their employing member firm, unless the registered person has provided prior written notice to the member firm in the form specified by the firm — giving the employing firm the opportunity to evaluate whether the proposed outside activity creates conflicts of interest, compliance risks, or reputational concerns that the firm needs to address, condition, or prohibit before the registered person begins the activity.
Rule 3270 is among the most frequently enforced rules in FINRA's disciplinary programme — the failure to provide prior written notice of outside business activities before engaging in them is identified consistently by FINRA as among the most common violations for which registered persons receive disciplinary sanctions. The rule reflects the straightforward regulatory principle that a member firm is responsible for supervising its registered persons' activities in a manner reasonably designed to prevent harm to customers and protect market integrity — and that effective supervision requires the firm to know what its registered persons are doing outside the firm before those activities begin rather than discovering them after the fact.
As of 2025 and 2026 FINRA is actively developing a proposed replacement rule — Rule 3290 — that would consolidate Rules 3270 and 3280 into a single streamlined framework. The proposed Rule 3290 is under industry comment and has not yet been adopted. Rule 3270 remains in full force and effect as of the date of this entry.
Rule 3270 defines an outside business activity broadly — encompassing any business activity outside the scope of the registered person's relationship with the member firm from which the registered person receives or has the reasonable expectation of receiving compensation.
Employment at another company — whether as an employee, independent contractor, consultant, or in any other compensated capacity — is the most straightforward outside business activity. A registered representative who teaches a college course for compensation, provides consulting services to a technology company, works part-time as a real estate agent, or serves as a paid board member of a non-profit organisation is engaged in outside business activities subject to Rule 3270's notice requirement.
Director and officer roles — whether compensated or not — at companies other than the employing member firm are outside business activities requiring prior written notice. A registered person serving as an officer or director of another company may have access to material non-public information about that company or may face conflicts of interest between their duties to that company and their duties to the member firm and its customers — concerns that the firm's evaluation process is designed to identify and address.
Self-employment and entrepreneurial activities — operating a side business of any kind — are outside business activities requiring prior written notice. A registered representative who operates an online retail business, manages rental properties as a sole proprietor, or provides financial coaching services outside the firm's platform is engaging in outside business activities that must be disclosed before they begin.
The reasonable expectation of compensation element — established in the rule's language — ensures that the notice requirement applies even when compensation has not yet been received but is anticipated. A registered person who begins providing services in anticipation of future payment cannot defer the notice obligation until the first payment arrives — the expectation of compensation at the time the activity begins triggers the requirement.
Rule 3270's supplementary material clarifies two important categories of activities that are exempted from the rule's notice requirement — passive investments and activities subject to the requirements of FINRA Rule 3280.
Passive investments — where the registered person has invested capital but plays no active role in the management, operation, or promotion of the enterprise — are not outside business activities subject to Rule 3270. A registered person who purchases stock in a private company, invests as a limited partner in a private equity fund, or holds real estate as a passive investor is not engaged in an outside business activity requiring Rule 3270 notice — because the investment is passive and creates no conflict of interest between the investor's role and their responsibilities to the member firm and its customers.
Activities subject to FINRA Rule 3280 — private securities transactions — are carved out from Rule 3270 because they are governed by the more specific and more demanding requirements of Rule 3280. A registered person who participates in a private securities transaction — as described in the FINRA Rule 3280 entry of this dictionary — must comply with Rule 3280's specific prior written notice, approval, and supervision requirements rather than the more general notice framework of Rule 3270.
Personal hobbies, purely personal activities with no business component, and activities conducted entirely within the scope of the registered person's relationship with the member firm are not outside business activities requiring Rule 3270 notice.
Rule 3270's supplementary material establishes specific obligations for member firms upon receiving prior written notice of a proposed outside business activity — ensuring that the notice process results in genuine supervisory evaluation rather than merely administrative acknowledgment.
Upon receiving prior written notice of a proposed outside business activity the member firm must consider whether the activity will interfere with or otherwise compromise the registered person's responsibilities to the firm or its customers — assessing whether the time commitment, competing loyalties, or financial interests created by the outside activity would impair the registered person's ability to fulfil their professional obligations to the firm and its customers.
The firm must also consider whether the proposed activity would be viewed by customers or the public as part of the member's business — based on factors including the nature of the activity, the manner in which it is conducted, the degree to which the registered person's professional credentials and securities industry affiliation are associated with the activity, and whether customers might reasonably believe the outside activity is conducted under the firm's supervision and regulatory oversight.
Based on this evaluation the firm may approve the activity without conditions, approve it subject to specific conditions or limitations designed to manage the identified risks, or prohibit the activity entirely if it determines that the conflicts, compliance risks, or reputational concerns it creates cannot be adequately managed through conditions.
The member firm must keep a record of its compliance with these obligations with respect to each written notice received — documenting the evaluation conducted, the determination made, and any conditions imposed — and must preserve this record for the period specified in SEC Exchange Act Rule 17a-4.
The prior written notice required by Rule 3270 must be submitted before the registered person begins the outside business activity — not after it has commenced, not simultaneously with the first day of the activity, but prior to its commencement.
The notice must be in writing — oral notification to a supervisor does not satisfy the requirement — and must be in the form specified by the member firm. Many member firms use specific OBA disclosure forms that registered persons must complete — if the firm has such a form the registered person must use it rather than providing informal written communication. A registered person who sends an email to their supervisor describing an outside activity may not have satisfied Rule 3270 if the firm requires notification through a specific form rather than informal email.
The timing requirement is prior — the notice must be submitted and the firm must have had the opportunity to evaluate the proposed activity before the registered person begins it. A registered person who begins an outside business activity without prior written notice and then discloses it after the fact has violated Rule 3270 regardless of whether the activity would have been approved had proper notice been given. The violation is the failure to give prior notice — not the nature of the activity itself.
Rule 3270 violations — the failure to provide prior written notice before engaging in outside business activities — are among the most frequently charged violations in FINRA enforcement actions against individual registered persons. The straightforward nature of the requirement — did the registered person give written notice before beginning the activity? — makes these violations relatively easy for FINRA to establish in disciplinary proceedings.
Common patterns of Rule 3270 violations include engaging in real estate transactions or operating real estate businesses without firm disclosure, providing investment advisory services outside the firm's platform without disclosure, serving on corporate boards without disclosure, operating businesses selling products or services to the registered person's customer base without disclosure, and participating in private lending or investment arrangements without disclosure.
The sanctions for Rule 3270 violations reflect the seriousness with which FINRA treats the failure to maintain the disclosure framework that enables effective supervision — registered persons who fail to disclose outside business activities may receive fines, suspensions, and in cases involving significant harm or deliberate concealment of problematic activities, a bar from the securities industry.
FINRA issued Regulatory Notice 25-05 in March 2025 proposing to replace Rules 3270 and 3280 with a single streamlined rule — proposed Rule 3290 — that would consolidate the outside business activities and private securities transactions frameworks into a unified approach designed to reduce duplication, clarify the scope of each obligation, and provide more efficient compliance procedures for member firms and registered persons.
The proposed Rule 3290 would maintain the core prior notice and firm evaluation framework that Rules 3270 and 3280 currently require — the fundamental principle that registered persons must disclose outside activities and that member firms must evaluate them for compliance implications would be preserved. The consolidation would primarily streamline the procedural aspects of the disclosure process — eliminating overlapping requirements and clarifying how the framework applies to specific fact patterns that had generated interpretive uncertainty under the current two-rule framework.
As of the date of this entry Rules 3270 and 3280 remain in full force. FINRA has not yet filed the proposed Rule 3290 with the SEC for approval and the timeline for adoption of the replacement framework has not been announced. The dictionary will be updated when the proposed Rule 3290 is adopted and becomes effective.
FINRA Rule 3270 is tested on the Series 7 and Series 65 examinations in the context of outside business activities, the prior written notice requirement, and the member firm's obligations upon receiving OBA notice.
The key points to retain are these.
FINRA Rule 3270 — Outside Business Activities of Registered Persons — prohibits registered persons from engaging in any business activity outside the scope of their relationship with their employing member firm from which they receive or expect to receive compensation without first providing prior written notice to the member firm in the firm-specified form. The notice must be prior — submitted before the activity begins.
The rule applies broadly to employment, independent contracting, self-employment, officer and director roles, consulting, and any other compensated outside activity. Passive investments and private securities transactions subject to Rule 3280 are exempted. Upon receiving notice the firm must evaluate whether the activity will interfere with the registered person's responsibilities to the firm or customers, or be perceived by customers as part of the firm's business — and may approve, conditionally approve, or prohibit the activity. The firm must document its evaluation and determination and preserve the records.
Failure to provide prior written notice before beginning an outside business activity is the violation — not the nature of the activity itself. Rule 3270 violations are among the most frequently charged violations in FINRA disciplinary proceedings — the prior notice requirement is straightforward and non-compliance is readily identifiable through examination. FINRA proposed Rule 3290 in March 2025 to consolidate Rules 3270 and 3280 into a single framework — Rule 3270 remains in effect as of the date of this entry.
