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What Are Outside Business Activity (OBA) Examples According to FINRA?
An Outside Business Activity (OBA) is any compensated business activity that a financial professional engages in outside of their primary firm, as defined by FINRA Rule 3270. Understanding what counts as an OBA is crucial for compliance.
Here are some common examples of activities that must be reported to your firm as OBAs:
- Consulting Work: Offering paid advisory services to individuals or businesses.
- Real Estate: Buying, selling, or brokering real estate, or earning income from managing rental properties.
- Freelance Work: Engaging in freelance writing, graphic design, or other skilled work for compensation.
- Side Businesses: Starting, owning, or operating any type of side business, from an online store to a lawn care service.
- Board Memberships: Serving on the board of directors for a company or organization where you are compensated.
What doesn't count as an OBA? FINRA Rule 3270 does not typically apply to passive investments like a diversified index fund or personal activities that do not involve compensation. However, even these may require disclosure under other FINRA rules.
Why Accurate OBA Disclosure Is Crucial
Even seemingly minor, unrelated OBAs must be disclosed to your firm. Failure to provide prior written notice is a violation of FINRA rules and can have severe consequences, including:
- Form U5 Termination: Your firm may terminate you and report the non-disclosure on your Form U5, which can be a red flag for future employers.
- FINRA Enforcement: FINRA is actively scrutinizing OBAs and has increased fines and suspensions for violations.
- Reputational Damage: A termination disclosure can harm your professional reputation and make it difficult to find new opportunities.
To ensure compliance, you must provide your firm with a comprehensive written notice that includes the business's name, its address, a description of your duties, your position, and the number of hours you devote to the activity.
What to Do if You Have an OBA Disclosure
If your career has been impacted by an OBA-related termination or a FINRA investigation, it's essential to seek legal counsel immediately. These disclosures can be challenging to remove, but it's not impossible.
Case Study: AdvisorLaw's Expungement Success
AdvisorLaw successfully helped a D.C.-based investment advisor remove a termination disclosure from his record after he was terminated for an undisclosed OBA. The advisor had an ATM business unrelated to his work, and while he failed to report the income, no clients were harmed. Through our legal representation, an arbitrator agreed the disclosure was inaccurate and recommended expungement, helping the advisor restore his perfect record on BrokerCheck and IAPD.
We specialize in FINRA arbitration and have a proven track record of advocating for advisors who have suffered harm due to false claims of misconduct. If you have concerns about an OBA or are facing an enforcement action, our team can provide the guidance and representation you need.
Engage our experts today!