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Question

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

A registered representative at a FINRA member broker-dealer accepts an offer to work on weekends as a paid financial literacy instructor at a local community college. The position does not involve selling securities, soliciting investments, or raising capital. Under FINRA Rule 3270 regarding Outside Business Activities (OBA), which of the following actions must the representative take prior to starting this teaching position?

  1. Provide prior written notice to the employing member broker-dealer.Answer
  2. B
    Obtain prior written approval directly from the Securities and Exchange Commission.
  3. C
    File a formal exemption request with the Municipal Securities Rulemaking Board.
  4. D
    Observe a mandatory two-year waiting period before receiving any outside compensation.

Answer

The registered representative must provide prior written notice to the employing member firm before commencing the compensated outside employment.
Under FINRA Rule 3270, any registered representative who wishes to engage in compensated outside business activities must provide prior written notice to their employing broker-dealer in the form specified by the firm. This requirement applies to secondary employment, consulting, or teaching roles outside the broker-dealer.

Step-by-Step Solution

1
Identify the type of activity and compensation involved in the scenario.
The representative is engaging in an outside business activity (teaching) for which compensation will be received.
Rule applicability under FINRA depends on whether the activity is outside the firm's scope and whether the individual is compensated or has an expectation of compensation.
2
Apply FINRA Rule 3270 governing Outside Business Activities (OBA).
FINRA Rule 3270 explicitly mandates that no registered person may be employed by or receive compensation from any person as a result of any business activity outside the scope of the relationship with the member firm unless prior written notice has been provided to the member firm.
Prior written notice allows the member firm to evaluate potential conflicts of interest or supervisory requirements.

Key Concept

FINRA Rule 3270 (Outside Business Activities) requiring prior written notice for compensated external roles
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities