Final answer:
FINRA rules on OBA require registered representatives to provide prior written notice to their employing broker-dealer before participating in any outside business activities to prevent conflicts of interest and for regulatory compliance.
Step-by-step explanation:
The Financial Industry Regulatory Authority (FINRA) rules regarding outside business activities (OBA) are designed to protect investors and maintain the integrity of the securities market. According to these rules, registered representatives or associated persons must provide prior written notice to their employing broker-dealer before engaging in any business activity outside the scope of their relationship with their employer. This requirement ensures that firms can monitor potential conflicts of interest and that all regulatory obligations are being met.
The specific rule that typically addresses this is FINRA Rule 3270. Under this rule, a registered person must provide notice of any outside business activity that could be reasonably expected to be viewed by customers or the public as part of their securities business or that could have an impact on their performance as an employee of their firm. Importantly, approval must be sought not from FINRA or another SRO directly, but from the employing firm itself. It is also not required to coordinate all activities between both employers, nor report all passive investments under this rule.