Outside business activities for investment adviser representatives

An outside business activity is any business a person at an advisory firm is engaged in apart from their work for the firm. The person must report it on Form U4, the firm must disclose investment-related and substantial ones in the Form ADV Part 2B brochure supplement, and the fiduciary duty requires the firm to identify and address the conflicts they create. Most firms meet this with a written requirement that staff get approval before starting one.

The rules come from several places: Form U4 for the individual, Form ADV for the firm, FINRA's rules for anyone who is also a registered representative, and the firm's own policies under Rule 206(4)-7 and its code of ethics.

Form U4 Question 13

Form U4 is the registration form for individuals, used both for registered representatives of broker-dealers and for investment adviser representatives registered with the states. Question 13, "Other Business," asks:

Are you currently engaged in any other business either as a proprietor, partner, officer, director, employee, trustee, agent or otherwise?

The question is not limited to investment-related work. The only exclusion written into the question is for non-investment-related activity that is exclusively charitable, civic, religious or fraternal and is recognized as tax exempt. For each activity the form asks for the name and address of the business, whether it is investment-related, its nature, the person's position or title, the start date, the approximate number of hours a month spent on it, the number of hours during securities trading hours, and a brief description of the person's duties.

How fast U4 has to be updated

For a person registered through a FINRA member, FINRA's By-Laws (Article V, Section 2(c)) require an amended Form U4 no later than 30 calendar days after the firm learns of the facts that require the amendment, as FINRA restated in Regulatory Notice 15-05. For a person registered only as an investment adviser representative, state rules govern the timing. Check the rule in each state where the person is registered.

Form ADV Part 2B, Item 4

Each brochure supplement must disclose the supervised person's other business activities in two tiers.

Item 4.A, investment-related activity. If the supervised person is actively engaged in any investment-related business or occupation, including being registered as a broker-dealer, registered representative, futures commission merchant, commodity pool operator or commodity trading advisor, the supplement must disclose it and describe any relationship with the advisory business. It must also:

• describe any material conflict of interest the relationship creates and generally how the firm addresses it
• disclose any commissions, bonuses or other compensation based on selling securities or other investment products, including 12b-1 trails, and explain that this gives the person an incentive to recommend products based on the compensation rather than the client's needs

Item 4.B, other activity. If the supervised person is actively engaged in any other business or occupation for compensation that provides a substantial source of their income or involves a substantial amount of their time, the supplement must disclose it and describe its nature. If the activity represents less than 10 percent of the person's time and income, the firm may presume it is not substantial.

Updating and filing the supplement

The Part 2B instructions require the firm to update a supplement promptly whenever information in it becomes materially inaccurate. An SEC-registered adviser does not file supplements with the SEC but must keep copies of them and their amendments under Rule 204-2(a)(14)(i). A state-registered adviser files a supplement through IARD for each supervised person doing business in that state.

Firm-level disclosure on Form ADV

Outside activities also show up at the firm level:

• Part 1A, Item 6 asks whether the firm itself is actively engaged in business as, among other things, a broker-dealer, registered representative, insurance broker or agent, real estate broker, accountant, lawyer or other financial product salesperson, whether it is engaged in any other business, and whether it sells products or services other than investment advice to its advisory clients.
• Part 2A, Item 10 asks the firm to disclose whether it or its management persons are registered as, or have applied to register as, a broker-dealer or registered representative, or as a futures or commodity professional, and to describe material relationships with related persons such as broker-dealers, insurance agencies, accounting firms and law firms, including the conflicts they create.
• Part 2A, Item 19.B, for state-registered advisers only, asks the firm to describe any business it is actively engaged in other than giving investment advice, and the approximate time spent on it.

For a solo adviser, the firm's activities and the individual's are the same activities, so the answers on U4, Part 1A, Part 2A and Part 2B should agree.

Dual registrants and FINRA Rule 3290

For a person who is also a registered representative of a broker-dealer, FINRA rules apply too. Today those are Rule 3270 (outside business activities) and Rule 3280 (private securities transactions).

On 15 September 2026 the SEC approved FINRA Rule 3290, Outside Activities Requirements (Exchange Act Release 34-106381), which replaces both. FINRA has said it will announce the effective date in a regulatory notice, and at the date of this guide it lists the rule as approved and pending an effective date. Until then, Rules 3270 and 3280 continue to apply. Under Rule 3290, as described in the SEC's approval order:

• a registered person gives the member prior written notice of an outside activity, which the rule limits to investment-related activity, and updates the notice for material changes
• the member must assess, at a minimum, whether the activity is really an outside securities transaction, whether it involves a customer of the registered person, whether it will interfere with the person's responsibilities to the member or its customers, and whether customers or the public will view it as part of the member's business, and then decide whether to condition, limit or prohibit it
• activity at an unaffiliated registered investment adviser is treated as an outside activity subject to notice and assessment, but the member is no longer expected to supervise it or keep records of it, which ends the approach set out in FINRA guidance from the 1990s
• activity on behalf of the member or an affiliate, such as advisory work at a dually registered firm or an affiliated RIA, is excluded

Whatever the broker-dealer does, supervising the advisory work remains the RIA's own responsibility under its policies.

The conflicts to assess

The 2019 fiduciary interpretation (Release IA-5248) requires an adviser to eliminate, or at least expose through full and fair disclosure, all conflicts that might incline it to give advice that is not disinterested. For outside activities the common ones are:

• Compensation incentives. Insurance commissions or product sales compensation that pay more for some recommendations than others.
• Customer overlap. Selling something else to advisory clients, or advising clients of the other business.
• Time. An activity that takes enough time to affect the service clients pay for.
• Confusion about whose business it is. Clients assuming the firm stands behind a separate venture.
• Material nonpublic information. A board seat or a role at a public company can bring MNPI into the firm. The 2004 code of ethics release (IA-2256) lists limits on serving as a director of a public company among the provisions advisers should consider for their codes. See What is MNPI?
• Access to client assets. Rule 206(4)-2 treats a capacity, such as trustee of a trust, that gives the firm or a supervised person legal ownership of or access to client funds or securities as custody. A role as trustee for a client needs to be checked against the custody rule.

A workable approval process

1. Require prior written notice of any outside activity before it starts, including unpaid board and trustee roles, and any material change after.
2. Collect the facts U4 asks for: the business, whether it is investment-related, role, start date, hours a month and hours during trading hours, and compensation.
3. Assess the conflicts above, and record the reasoning.
4. Decide and record: approve, approve with conditions, or decline. Conditions might be no solicitation of advisory clients, a recusal, or placing an issuer on the restricted list.
5. Update the disclosures: U4 within the deadline, the brochure supplement promptly if it becomes materially inaccurate, and Form ADV Part 1A and 2A if the firm's own answers change.
6. Recertify annually. Ask each person to confirm their list of outside activities, and compare it with U4 and the supplement.
7. Test it in the annual review under Rule 206(4)-7.

What examiners look for

An examiner can compare three sources that should tell the same story:

• what U4 says the person does outside the firm
• what the brochure supplement and Form ADV tell clients
• what the firm's own approval records show

Gaps between them are where findings come from: an insurance appointment on U4 with no conflict disclosure in Part 2B, an approval with no record of the assessment, or an activity that grew past the 10 percent presumption without anyone revisiting the supplement.

Common questions

What counts as an outside business activity for an IAR?

Any business the person engages in apart from the advisory firm, whether as an owner, officer, director, employee, trustee, agent or otherwise. Form U4 Question 13 asks about all of it. Form ADV Part 2B Item 4 requires disclosure of investment-related activities and of other activities that are a substantial source of income or time.

Do I have to report a non-investment job on Form U4?

Yes, in most cases. Form U4 Question 13 asks about any other business, investment-related or not. It excludes only non-investment-related activity that is exclusively charitable, civic, religious or fraternal and recognized as tax exempt. FINRA Rule 3290, once effective, limits the separate notice a registered representative gives to the broker-dealer to investment-related activities. That is a change to FINRA's rule, not to the U4 question.

When does an outside activity go in the brochure supplement?

Always, if it is investment-related. Otherwise, if it is for compensation and provides a substantial source of income or takes a substantial amount of time. An activity below 10 percent of the person's time and income may be presumed not to be substantial.

Does an RIA have to approve outside business activities?

No SEC rule prescribes an approval process for advisers. But the firm has to know about the activity to disclose it and address its conflicts, and its policies under Rule 206(4)-7 must be reasonably designed to prevent violations. A written prior approval requirement is the usual way to do that.

How quickly must Form U4 be amended for a new outside activity?

For a person registered through a FINRA member firm, no later than 30 calendar days after the firm learns of the facts. For an investment adviser representative registered only with the states, the state's rule sets the deadline.

Start from a template

Luna's compliance manual template includes an outside business activities policy with an approval record, and the code of ethics template covers board seats and MNPI. For the disclosure side, see the guides to Form ADV Part 2A and 2B and the Form ADV annual amendment.