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Question

Difficulty: EasyGifts, Gratuities, Political Contributions, and Outside Business Activities

A registered representative is reviewing industry rules regarding compliance and business conduct. Which of the following statements regarding outside business activities (OBAs) and political contributions are CORRECT?

  1. An associated person must provide prior written notice to their employing member firm before engaging in any compensated outside business activity.Answer
  2. A Municipal Finance Professional (MFP) may contribute up to $250 per election to an official's campaign for whom the MFP is eligible to vote without triggering a two-year ban on negotiated municipal securities business.Answer
  3. C
    An MFP may contribute any dollar amount to an issuer candidate's campaign without restriction, provided the MFP lives in a different state and cannot vote for that candidate.
  4. D
    Gifts exceeding $100 given to customer account holders are permissible without member firm recordkeeping as long as a direct notification is filed with the SEC.

Answer

The statements requiring prior written notice for compensated outside business activities and allowing up to a $250 political contribution by an MFP eligible to vote for the candidate are correct.
The statement regarding outside business activities is correct because FINRA Rule 3270 requires prior written notice to the employing member firm before engaging in compensated outside work. The statement regarding political contributions is correct because MSRB Rule G-37 permits a de minimis contribution of up to $250 per election to a candidate for whom the MFP is eligible to vote without triggering a business ban.

Step-by-Step Solution

1
Evaluate the notification requirement for Outside Business Activities (OBA) under FINRA Rule 3270.
Determine that prior written notice to the employing broker-dealer is required for any compensated activity outside the firm.
FINRA Rule 3270 explicitly mandates prior written notification prior to engaging in compensated OBAs.
2
Evaluate MSRB Rule G-37 political contribution rules for Municipal Finance Professionals (MFPs).
Confirm that the de minimis exemption permits up to $250 per election to candidates for whom the MFP is eligible to vote.
Rule G-37 exempts contributions up to $250 per election strictly when the MFP is entitled to vote for the candidate.
3
Analyze the incorrect statements regarding non-voting contributions and gift limit waivers.
Identify that contributing to non-eligible candidates violates Rule G-37 and that gift rules cannot be bypassed by SEC filings.
Non-eligible candidate contributions trigger a mandatory two-year ban under pay-to-play rules, and FINRA Rule 3220 strictly limits business gifts to $100 per person annually.

Key Concept

Outside Business Activities (FINRA Rule 3270), Political Contributions (MSRB Rule G-37), and Gift Regulations (FINRA Rule 3220)
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities