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Outside activities, selling away and gifts

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Notice for an outside job. Approval for a paid outside deal. Three hundred dollars a year for gifts. Three rules, three exam questions.

The rule
  • OBA: prior written notice.
  • PST with compensation: written approval and supervision.
  • Gifts: $300 per person per year. Non-cash compensation is barred unless it fits a stated exception, and nothing preconditioned on a sales target ever does.

Notice, approval, and a hard number

An outside business activity is any role or paid activity outside the relationship with the firm that is not a securities transaction. Rule 3270 covers being an employee, independent contractor, sole proprietor, officer, director or partner of another person, or being paid or expecting pay from any outside business activity. A second job, a directorship (paid or unpaid), a consultancy and a family business all count. The requirement is prior written notice to the firm. The firm may then impose conditions or prohibit the activity, but the person’s obligation is to tell the firm before starting, not to wait for permission.

Keep reading: 4 more paragraphs (about 2 min)

A private securities transaction is different, because it involves securities. Selling an investment outside the firm’s systems — often called selling away — requires prior written notice, and where the person will receive compensation the firm must approve the transaction in writing and record it on its own books as though it were the firm’s business. That supervision is precisely what the rule exists to secure.

Gifts are governed by a hard number. A person may not give, or permit to be given, gifts of more than $300 per individual per year in relation to the business of the recipient’s employer. Ordinary business entertainment where both parties attend is treated separately from a gift, and the limit is per person and per year rather than per occasion, so several smaller gifts to the same person are added together.

Political contributions carry a rule of their own where government business is involved. A covered member may not engage in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser for two years after a contribution to an official of that entity by the firm or a covered associate. A de minimis exception permits up to $350 per official per election where the contributor may vote for that official, and up to $150 where they may not. Municipal securities have a parallel rule with different numbers. Under MSRB Rule G-37, a dealer may not do municipal securities business, such as a negotiated underwriting, with an issuer for two years after a contribution to an official of that issuer by the dealer, one of its municipal finance professionals or a PAC they control. Its exception is $250 per election, for a municipal finance professional who can vote for the official. Rule 2030 covers soliciting government entities for investment advisers; Rule G-37 covers municipal securities business.

One change is on the way. On September 15, 2026, the SEC approved FINRA Rule 3290, which will replace Rules 3270 and 3280. It is not in force yet, and FINRA will announce the date in a regulatory notice. Until then, the rules in this lesson apply, and they are the ones to learn. Under the new rule, a registered person will need to give notice only of outside activities that are investment-related; outside securities transactions keep their own notice and approval rules.

Exam terms (7)
Outside business activity
An outside role, such as a job or directorship, or paid outside activity that is not a securities transaction.
Private securities transaction
A securities transaction outside the firm’s regular business; selling away.
Prior written notice
Telling the firm before starting; the requirement for an outside business activity.
Written approval
The firm’s agreement, required for a compensated private securities transaction.
Gift limit
$300 per individual per year in relation to the recipient’s employer’s business.
De minimis contribution
The small political contribution permitted without triggering the two-year restriction.
MSRB Rule G-37
Two-year ban on municipal securities business after a contribution to an issuer official; $250 exception for a municipal finance professional who can vote.

The compensation that does not arrive as money

The gift cap is about size. There is a second rule alongside it that is about shape, and candidates miss it because it does not look like a compensation rule at all. Non-cash compensation means any form of compensation received in connection with the sale and distribution of investment company securities that is not cash — merchandise, gifts and prizes, travel expenses, meals and lodging are the examples the rule itself gives.

Keep reading: 3 more paragraphs (about 1 min)

The default is a prohibition. Neither a member nor a person associated with a member may accept or make payments or offers of payments of non-cash compensation, except in the cases the rule then lists. Read that order carefully: it is not a cap with things falling under it, it is a bar with narrow doors cut into it.

Three doors matter here. Gifts that do not exceed the annual per-person amount FINRA fixes are permitted, provided they are not preconditioned on achievement of a sales target. An occasional meal, a ticket to a sporting event or the theater, or comparable entertainment is permitted, provided it is neither so frequent nor so extensive as to raise any question of propriety and, again, is not preconditioned on a sales target. And an offeror — a fund, its adviser, its administrator, its underwriter — may pay or reimburse the cost of a meeting held for the training or education of associated persons.

The phrase to hold on to is preconditioned on achievement of a sales target. It appears twice, and it is what makes a sales contest with prizes different from an occasional lunch. A weekend away for whoever sells the most of one fund family is not a small gift that happens to be large; it is the arrangement the rule was written against, and its value is not the reason it fails.

Exam terms (6)
Non-cash compensation
Compensation for selling that is not money: merchandise, prizes, travel, meals, lodging.
Offeror
The fund, its adviser, administrator or underwriter — the party on the other side of the arrangement.
Sales target
The condition that turns a permitted courtesy into a prohibited incentive.
Training or educational meeting
The one category an offeror may pay for outright, and only where the meeting is genuine.
Personal life-event gift
A customary wedding, birth or similar gift unrelated to the recipient’s employer’s business; outside the $300 cap and the gift records.
Form G-37
A dealer’s quarterly report of municipal political contributions to the MSRB, made public.

Gifts the cap leaves out, and the G-37 report

The $300 cap reaches gifts in relation to the business of the recipient’s employer. Customary personal gifts for infrequent life events, such as a wedding, are excluded from the cap and from the firm’s gift records when they are not related to that business; firms consider any pre-existing personal relationship and who paid, and FINRA presumes a gift the firm pays for is business-related. Bereavement gifts, de minimis items such as pens, logo promotional items of nominal value and decorative items marking a deal are excluded too. A gift handed over during business entertainment still counts unless it is a personal, de minimis, promotional or commemorative item.

Keep reading: 1 more paragraph (about 1 min)

Municipal pay-to-play has a reporting side. Under MSRB Rule G-37, a dealer files Form G-37 with the MSRB after each calendar quarter, listing reportable contributions to municipal officials by the dealer, its municipal finance professionals and their PACs, and the MSRB makes the forms public. A municipal finance professional’s contributions to an official she can vote for, up to $250 per election, stay off the form and do not trigger the ban.

Notice, approval and the limits

Outside business activityPaid private securities transactionGifts
What the firm getsPrior written noticePrior written noticeRecords of what was given
What the firm must doMay impose conditions or prohibitApprove in writing and superviseMonitor against the limit
Recorded on the firm’s booksNoYes, as if it were firm businessIn the firm’s gift records
The limitNone; the test is disclosureNone; the test is approval$300 per person per year
Tell them, or get their agreement — and count the gifts.

Try it: Decide what each of four situations requires: teaching an evening class for a fee; helping a friend invest in a private company and taking a fee for it; sending two gifts of $200 each in the same year to the treasurer of a company that trades through your firm; making a small contribution to a state official whose entity your firm solicits. One needs approval rather than notice, and one is already over a limit.

Check yourself

Try a question, then read the explanation to review the rule.

Opening your study record…

Worked example

A representative is asked to join the board of a local company for a fee, helps a neighbor invest in a private placement for a commission, and sends two gifts of $200 during the same year to the treasurer of a corporate customer.

  1. The board seat is an outside business activity: a directorship of another company, which would need notice even if it were unpaid, and not a securities transaction. It requires prior written notice, and the firm may impose conditions or prohibit it.
  2. The private placement is a private securities transaction, and the commission makes it a compensated one. It requires prior written notice and the firm’s written approval, and the firm must record and supervise it as though it were its own business.
  3. Doing that deal without approval is selling away, and it is a violation whether or not the investment performs well and whether or not the neighbor is happy.
  4. The gifts are added together, because the limit is per person and per year. The gift rule reaches gifts to a person in relation to the business of that person’s employer, which is what the treasurer receives. Two gifts of $200 to the same treasurer total $400 against a limit of $300 per individual per year, so the second gift takes the representative over it.
  5. Nothing about the treasurer’s gratitude, the quality of the investment or the size of any single gift changes these answers. Each rule is applied to its own facts.

Same rule, new context

Opening your study record…

The closest contrast

OBA: notice.

Paid PST: approval.

This decides what the representative must have in hand before acting. Notice means the firm has been told and may respond; approval means nothing may happen until the firm has agreed in writing, and only the securities transaction demands the second.

Summary

  • An outside business activity requires prior written notice; the firm may then impose conditions.
  • A private securities transaction for compensation requires written approval and firm supervision.
  • Gifts are limited to $300 per individual per year and are added together across the year. Personal life-event, bereavement, de minimis, logo promotional and commemorative gifts are outside the cap; a gift handed over at a business dinner counts unless it is a personal, de minimis, promotional or commemorative item.
  • A political contribution above the de minimis amounts triggers a two-year restriction on compensated government-entity business. MSRB Rule G-37 sets the same two years for municipal securities business, with a $250 exception only for a municipal finance professional who can vote; dealers report other contributions on Form G-37 each quarter.
  • FINRA Rule 3290 will replace Rules 3270 and 3280 on a date FINRA has not yet set; until then, Rules 3270 and 3280 apply.

Related practice

Sources

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