Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkHard
An employee of a broker-dealer is engaged in outside business activities (OBA) that involve selling insurance products. According to FINRA rules, what is the employee's obligation regarding this OBA?
- AThe employee must provide prior written notice to their employing broker-dealer.
- BNo obligation, as long as the OBA is unrelated to securities.
- CThe employee must obtain written approval from FINRA before engaging in the OBA.
- DThe employee must notify FINRA directly of the OBA.
Show answer & explanationAnswer & explanation
Correct answer: A. The employee must provide prior written notice to their employing broker-dealer.
FINRA Rule 3270 (Outside Business Activities of Registered Persons) requires registered persons to provide prior written notice to their employing broker-dealer before engaging in any outside business activity, whether compensated or not. The firm then determines if the activity is permissible and how it should be supervised.
Why the other options are wrong
- B. Even if unrelated to securities, all OBAs must be disclosed to the firm.
- C. Approval is from the firm, not FINRA, though the firm's decision is subject to FINRA rules.
- D. Notification is to the employing broker-dealer, not directly to FINRA.
Outside Business Activities (OBA)
Outside Business Activities (OBA) refer to any business activity engaged in by a registered person outside the scope of their relationship with their employing broker-dealer. FINRA Rule 3270 requires prior written notice to the firm.
- Requires prior written notice to the employing broker-dealer.
- Applies to all business activities, compensated or not.
- Allows the firm to assess conflicts of interest and supervisory needs.
Memory trick: Outside business? Write a note to your firm, not just a thought.