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Question

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

A registered representative at a FINRA member firm volunteers as an uncompensated youth soccer coach at a local community center on weekends. The representative receives no salary, stipend, or financial remuneration of any kind for this role. Under FINRA Rule 3270 regarding Outside Business Activities (OBA), which of the following statements correctly describes the representative's regulatory requirement?

  1. The representative is not required to provide prior written notice to the member firm because the activity is uncompensated.Answer
  2. B
    The representative must obtain written permission directly from FINRA before participating in any weekend community activity.
  3. C
    The representative must provide prior written notice because all outside activities trigger an automatic two-year ban on soliciting municipal securities business.
  4. D
    The representative must register as an investment adviser with state regulators before engaging in any non-profit volunteer work.

Answer

The representative is not required to provide prior written notice to the member firm under FINRA Rule 3270 because the volunteer activity is uncompensated.
Under FINRA Rule 3270, registered persons are prohibited from being employed by or receiving compensation from any business activity outside the scope of their relationship with their member firm unless they provide prior written notice to the firm. Because the coaching position is purely voluntary and uncompensated, it does not trigger the mandatory prior written notification requirement under FINRA rules.

Step-by-Step Solution

1
Identify the relevant regulatory rule
FINRA Rule 3270 governs Outside Business Activities (OBA) of registered persons.
The scenario asks about the regulatory requirement for engaging in an outside activity while employed at a member firm.
2
Evaluate the compensation element of the activity
The representative receives no salary, stipend, or compensation of any kind.
FINRA Rule 3270 specifically restricts compensated business activities or those where there is a reasonable expectation of compensation.
3
Determine the notification requirement
Uncompensated volunteer work does not require prior written notice under FINRA rules.
Because no compensation is involved, the activity falls outside the mandatory notification requirement of Rule 3270.

Key Concept

Outside Business Activities (FINRA Rule 3270) Compensation Threshold
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities