Optimal Outside Business Activities Compliance Goes Beyond Disclosures

It’s 4PM on a Friday. You were hoping to wrap up for the day to start your weekend, but there’s a deal to be closed. The CEO is looking for confirmation that there are no conflicts around outside business activities or any other potential conflicts of interest, and he needs that info stat.

When Manual Processes and Separate Systems Become an OBA Compliance Risk

You and the rest of the compliance team buckle down. You divide and conquer to pull information from multiple systems and then meet to cobble all of the disparate data together. It takes a few hours – with the CEO pinging you impatiently for updates the entire time. And throughout the process you’re worrying that in the rush your team missed a key piece of data or made a manual mistake that could lead to backlash down the road. You breathe a sigh of relief when you email the info over to the CEO and head out the door, but you think to yourself, there really has to be a better way.

Does that story sound familiar?

Why OBA Disclosures Alone Are Not Enough

If you work in Compliance, you know what an Outside Business Activity is (Under FINRA rules, an OBA is any business activity outside an employee’s firm that must be disclosed and approved, for example consulting, real estate, or advisory services.) You know that they need to be disclosed, and you probably have a program in place to review employee OBA attestations at least annually.

But an effective OBA management program must go beyond just disclosures. Merely collecting annual attestations leaves significant gaps:

• Manual collection and tracking is a time-consuming and often frustrating process for both employees and compliance.
• Separate systems lead to duplication of effort and key updates falling through the cracks
• If conflicts of interest around outside business activities are not identified and mitigated, there’s significant risk exposure for the firm.

Outside Business Activity: Putting the Spotlight on Moonlighting

Outside Business Activities (OBAs) and Personal Securities Transactions (PSTs) in the Enforcement Spotlight

Examples of Recent FINRA OBA and PST Enforcement

The regulators are paying attention. Action taken for violations of Rule 3270 covering Outside Business Activities of Registered Persons and Rule 3280 covering the Private Securities Transactions of an Associated Person has been a consistent focus for FINRA.  

Examples of recent FINRA enforcement around outside business activities and private securities transactions in 2025 and years past include:

• A broker was barred for failure to disclose personal securities transactions
• US financial advisor suspended for operating an outside administrative consulting business without firm approval
• US broker-dealer representative suspended for managing real estate and consulting through an LLC without disclosing the activity to his firm
• A firm was fined for mis-categorizing an employee's private securities transaction as an outside business activity
• US advisor loses job after 18 years at firm for undisclosed side hustle seasonally preparing taxes
• US advisor charged with running ‘small empire’ of businesses and borrowing from a customer without seeking required approvals from his firm
• US broker charged with running coaching business for colleagues
• FINRA fined firm $50K for failure to maintain WSP’s and submit Forms U4 to comply with OBA regulations
• FINRA fines firm for failure to act on red flags regarding employee outside business activity and private securities transactions activity
  

OBA and PST Enforcement Highlights Compliance Risk for Both Individuals and Firms

Some of these stories are egregious examples of an outside business activity that’s clearly against the rules. But in some situations whether or not an activity is against the rules is not so cut and dried.

Many recent enforcement actions target individuals. But even when a firm is not directly cited, the business implications are substantial:

• Reputational Damage
• Business Disruption and Revenue Loss
• Regulatory Penalties
• Conflicts of Interest
• Operational Risk and Inefficiencies

Are There Changes to FINRA OBA and PST Regulations on the Horizon?

FINRA’s Regulatory Notice 25-05 proposed significant changes to the rules governing outside business activities (OBAs) and private securities transactions (PSTs), aiming to replace Rules 3270 and 3280 with a single, more efficient rule.  

With the comment phase closed, now is the time to take a hard look at your compliance program to ensure that you have a solid framework in place.

Read more about FINRA's proposed changes to OBA and PST compliance rules. 

OBA Compliance Risk for Small Firms

According to Thomson Reuters, additional investment-related services are often an attempt to provide clients a more comprehensive approach managing their finances. For example, a rep may offer accounting, notary or insurance services — not covered by an adviser’s client protections — in addition to asset management to clients. In a small firm, customers may be looking for their advisors to wear many hats, especially in small towns and rural areas where a wide range of services might not be available.

See how MCO provides small firms with scalable and affordable compliance automation

MCO Enables Financial Services Firms to Streamline and Automate the Outside Business Activity Management Process

The effective management of Outside Business Activities goes far beyond simply asking staff to fill out an annual form. Firms need a best practices framework that supports the efficient monitoring and disposition of OBAs while flagging exceptions for mitigation.

MyComplianceOffice provides organizations of all sizes with a solution to automate the capture and management of Outside Business Activities as part of a single employee compliance platform.

MCO’s OBA solution allows firms to:

  Reduce the amount of time compliance spends tracking and monitoring OBAs
  Minimize the risk of regulatory censure
  Discourage bad actors and rogue activities
  Ensure employees are aware of their compliance obligations – and make it easy for then to fulfill them
  Streamline processes and increase efficiency with automation
  Promote a culture of compliance

Plus, centralized data and a unified platform provide a complete picture of employee activity and compliance – not just OBAs – on one dashboard.

MCO Enables Firms to Tell the Story of Fast Response Under Pressure

Let’s revise our story with a happier ending

It’s 4PM on a Friday. There’s a deal to be closed and the CEO needs confirmation that there are no conflicts right away. You log into MyComplianceOffice and leverage the intuitive interface and integrated data to conduct an automated check across the organization. The information is sent to the CEO with a complete audit trail. It’s 4:15. The CEO is satisfied that they have the data that they need to move their deal forward—and you can start your weekend confident in your compliance.

Want to see how MCO can help your firm achieve confident, consistent and integrated compliance? Download our Brochure on Outside Business Activities and contact us for a demo today!