In today's era of side hustles, should RIAs and broker-dealers be required to supervise every outside activity their affiliated advisors pursue—even those completely unrelated to finance?
FINRA is signaling that perhaps they shouldn’t.
As part of a broader review of its regulatory framework, FINRA is inviting feedback on a proposed update to its rules governing outside business activities (OBAs) and private securities transactions (PSTs). The goal: reduce unnecessary compliance burdens while strengthening focus on activities that could genuinely impact investors.
Under the proposal, FINRA aims to deprioritize side gigs that are clearly unrelated to an advisor’s investment business. Instead, it proposes a sharper focus on “outside investment-related activities that may pose a greater risk to the investing public and members,” as FINRA describes.
“This approach will enhance investor protection while reducing unnecessary regulatory burdens by eliminating the reporting of low-risk activities that generate white noise,” FINRA notes. Examples include bartending, driving for a rideshare company, or officiating sports events—none of which would typically raise investor protection concerns.
The proposed shift would instead prioritize the disclosure of business activities that may intersect with an advisor’s wealth management responsibilities. This includes work involving crypto assets, commodities, annuities, or private placements—especially when conducted outside the advisor’s primary firm.
Advisors would still be required to disclose specific outside activities and securities transactions to their firm. Firms, in turn, would evaluate whether the activity was properly characterized, involved existing clients, or could be reasonably viewed as an extension of the advisor’s role.
This new initiative revisits an earlier 2018 attempt by FINRA to narrow the scope of broker oversight rules, which ultimately stalled before final implementation. Now, with industry evolution and the rise of decentralized finance and gig work, FINRA appears ready to revisit the issue.
For RIAs, the implications could be significant. Less time spent tracking non-investment-related side work means more bandwidth to focus on activities that truly pose a risk to client portfolios or firm reputations.
FINRA is seeking public comment from member firms and stakeholders on how this rule consolidation could affect compliance practices, and whether alternative approaches should be considered.
Comments are due by May 13.
