FINRA May Be Redefining How Hybrid RIAs Are Treated
FINRA proposed Rule 3290 (Outside Activities Requirements), which would replace existing Rules 3270 (Outside Business Activities) and 3280 (Private Securities Transactions), potentially reshaping compliance responsibilities and economics for hybrid models.
FINRA may be redefining how hybrid RIAs are treated.
Last week, FINRA proposed Rule 3290 (Outside Activities Requirements), which would replace existing Rules 3270 (Outside Business Activities) and 3280 (Private Securities Transactions).
Under proposed Rule 3290:
- An associated person's activity at an SEC- or state-registered RIA would be treated as an outside activity, not a private securities transaction.
- The associated person would only need to provide prior written notice.
- Broker-dealers would have upfront assessment obligations, but no ongoing supervision or recordkeeping responsibility for the RIA activity.
Why this matters:
Historically, many independent broker-dealers have applied revenue "haircuts" to hybrid RIAs to offset supervisory and recordkeeping obligations. If Rule 3290 is adopted as proposed, it raises a real question: will those haircuts be revisited or eliminated when supervision is no longer required?
This proposal could meaningfully shift compliance responsibilities and economics for hybrid models. ICS is monitoring this development closely and evaluating its practical impact for broker-dealers and RIAs.
ICS advises financial institutions navigating regulatory changes of this type. If your firm needs to assess the impact of this development on your compliance program, contact us to discuss.
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