IAA Letter to SEC on FINRA’s Proposed Outside Activities Rule
February 24, 2026
Ms. Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Re: File No. SR-FINRA-2026-001: Notice of Filing of a Proposed Rule Change to Adopt FINRA Rule 3290 (Outside Activities Requirements)
Dear Ms. Countryman:
The Investment Adviser Association (IAA)[1] appreciates the opportunity to comment on the Financial Industry Regulatory Authority’s (FINRA’s) proposal to adopt new FINRA Rule 3290, Outside Activities Requirements (Proposal), which would replace existing FINRA Rule 3270, Outside Business Activities of Registered Persons, and Rule 3280, Private Securities Transactions of an Associated Person.[2] We support the Proposal, which reflects important changes to FINRA’s initial framework outlined in Regulatory Notice 25-05 (Notice Proposal)[3] recommended by the IAA.[4] Specifically, we support the proposed changes to the Notice Proposal that would exclude from supervision and recordkeeping requirements investment adviser activity at an unaffiliated adviser (Unaffiliated IA Activities) over which FINRA has no authority.
Summary of the IAA’s Recommendations on the Notice Proposal
Under the Notice Proposal, FINRA would have required broker-dealer supervision and recordkeeping of Unaffiliated IA Activities in new Rule 3290.[5] The IAA strongly opposed this approach, noting that investment advisers are subject to robust regulation under the Investment Advisers Act of 1940 (or state statutes) and the SEC’s (or the states’) rules and examination, and that FINRA lacks authority to oversee the activities of investment advisers. In addition, we raised substantive concerns about whether broker-dealers could effectively oversee Unaffiliated IA Activities given the differences in their business models, client or customer relationships, and legal duties. We also questioned whether broker-dealers could effectively evaluate or address an unaffiliated investment adviser’s conflicts of interest and raised concerns about the privacy of advisory clients’ data.
The IAA Supports Excluding Unaffiliated IA Activities from the Supervision and Recordkeeping Requirements under the Proposal
The Proposal acknowledges the “widespread opposition to the requirement for broker-dealers to supervise outside IA activities conducted through unaffiliated IAs,” noting that commenters on the Notice Proposal, including the IAA, underscored that this requirement is outside FINRA’s jurisdiction.[6] The Proposal “recognizes that IA activity is subject to another regulatory regime, which creates the potential for regulatory duplication or inconsistencies,”[7] and that “IAs generally are directly regulated by either the SEC or the states, and subject to a fiduciary obligation to their clients.”[8] The Proposal also makes the point that:
The imposition of broker-dealer supervisory obligations raises practical challenges, particularly for members that do not have an affiliated IA and are unlikely to have specialized knowledge of IA business practices and regulations, yet are currently required to supervise their associated persons’ outside IA activities. These issues also create confusion about which regulatory standards should apply – BD or IA requirements – which has the potential to undermine effective supervision.[9]
We believe that the changes from the Notice Proposal more appropriately reflect the different regulatory regimes governing investment advisers and broker-dealers and the limits on FINRA’s authority over investment advisers.
We also appreciate FINRA’s recognition of the other practical and substantive concerns we and other commenters raised. The Proposal states:
FINRA also acknowledges the concerns that commenters articulated about the practical difficulties and costs of supervising outside IA activities. In addition to the questions about what supervision is required, members may lack access to information necessary to meaningfully supervise outside unaffiliated IA activities, creating an untenable situation where members bear regulatory responsibility and potential liability without adequate means to fulfill their regulatory obligations. Furthermore, privacy concerns create substantial obstacles for members in obtaining and safeguarding personal information of unaffiliated IA clients and potentially raise risks for members under various privacy laws and rules.[10]
For all these reasons, under the Proposal, Unaffiliated IA Activities would be considered outside activity under Rule 3290 rather than outside securities transactions. As such, Unafffiliated IA Activities would continue to be subject to prior written notice and upfront assessment by the broker-dealer, but would not be subject to broker-dealer supervision and recordkeeping.[11] In our view, the Proposal reflects a reasonable and appropriate update to the prior rule framework and the Notice Proposal.
The IAA Supports FINRA’s Removal of the Obligations Imposed by Prior Guidance
In line with the proposed treatment of Unaffiliated IA Activities as outside activities rather than outside securities transactions, and consistent with the IAA’s recommendation, proposed Rule 3290 would also remove obligations relating to broker-dealer oversight of investment adviser activities imposed through a series of Notices to Members issued in the 1990s. The IAA supports removal of these obligations, which, as the Proposal recognizes, have “caused significant confusion and practical challenges.”[12]
* * *
We appreciate your consideration of our comments on this important issue. Please do not hesitate to contact the undersigned at (202) 293-4222 if we can be of further assistance.
Respectfully Submitted,
Gail C. Bernstein
General Counsel and Head of Public Policy
Monique S. Botkin
Associate General Counsel
cc:
The Honorable Paul S. Atkins, Chairman
The Honorable Hester M. Peirce, Commissioner
The Honorable Mark T. Uyeda, Commissioner
Brian Daly, Director, Division of Investment Management
[1] The IAA is the leading organization dedicated to advancing the interests of fiduciary investment advisers. For more than 85 years, the IAA has been advocating for advisers before Congress and U.S. and global regulators, promoting best practices and providing education and resources to empower advisers to effectively serve their clients, the capital markets, and the U.S. economy. Our members range from global asset managers to the medium- and small-sized firms that make up the majority of our industry. Together, the IAA’s member firms manage more than $55 trillion in assets for a wide variety of individual and institutional clients, including pension plans, trusts, mutual funds, private funds, endowments, foundations, and corporations. For more information, please visit www.investmentadviser.org.
[2] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change to Adopt FINRA Rule 3290 (Outside Activities Requirements), SEC Rel. No. 34-104746; File No. SR-FINRA-2026-001 (Jan. 29, 2026).
[3] FINRA Requests Comment on a Proposal to Reduce Unnecessary Burdens and Simplify Requirements Regarding Associated Persons’ Outside Activities, Regulatory Notice 25-05 (Mar. 14, 2025).
[4] IAA Letter to FINRA on Proposed Outside Activities Rule (May 13, 2025) (IAA 2025 Letter).
[5] By contrast, investment adviser activities at dually-registered firms and at advisers affiliated with a broker-dealer (together, Affiliated IA Activities) were proposed to be excluded from Rule 3290 because FINRA believes Affiliated IA Activities should not be considered activity performed away from the broker-dealer. Proposal at 10-11.
[6] Proposal at 30 (footnote omitted).
[7] Id. at 31.
[8] Id. at 11.
[9] Id. at 31.
[10] Id. at 32.
[11] FINRA has added supplementary material in proposed Rule 3290 to clarify the application of the proposed rule to this activity. See proposed FINRA Rule text at 581 (“.03 Activity at an Unaffiliated Registered Investment Adviser. An associated person’s activity at an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions) shall be considered an outside activity of a registered person and not an outside securities transaction for purposes of this Rule.”). Broker-dealers could themselves impose conditions, limitations, or prohibitions on the Unaffiliated IA Activities of their associated persons. Proposal at 32.
[12] Proposal at 11 (citing Proposal, n. 3 and Notice to Members 94-44 (May 1994) and Notice to Members 96-33 (May 1996)).