FINRA Series 7 / 63 / 65 Selling Away and Outside Business Activity
Last updated: May 2, 2026
Selling Away and Outside Business Activity questions are one of the highest-leverage areas to study for the FINRA Series 7 / 63 / 65. This guide breaks down the rule, the elements you need to recognize, the named traps that catch most students, and a memory aid that scales to test day. Read it once, then practice the same sub-topic adaptively in the app.
The rule
FINRA Rule 3270 requires a registered person to give prior written notice to their member firm before engaging in any outside business activity (OBA) for compensation or a reasonable expectation of compensation. FINRA Rule 3280 separately requires prior written notice — and, when compensation is involved, the firm's prior written approval and supervision — before participating in any private securities transaction (a 'selling away' transaction) that occurs outside the regular course of the rep's employment. The two rules are distinct: 3270 covers non-securities outside work; 3280 covers securities transactions executed away from the firm.
Elements breakdown
Outside Business Activity (Rule 3270)
Any business activity outside the scope of the rep's relationship with the member firm, conducted as an employee, independent contractor, sole proprietor, officer, director, or partner.
- Activity outside scope of firm employment
- Compensation received or reasonably expected
- Prior written notice to firm required
- Firm assesses interference and conflict
- Firm may impose conditions or prohibit
Private Securities Transaction (Rule 3280)
Any securities transaction outside the regular course or scope of the rep's employment with the member, including new offerings of securities not registered with the firm.
- Securities transaction away from firm
- Prior written notice to firm always required
- Detailed description: product, role, compensation
- If compensated: firm written approval needed
- Approved transactions: recorded on firm books
- Supervised as if executed by the firm
Firm Response Obligations
How the member must react once notice is delivered under either rule.
- 3270: evaluate interference, conflicts, customer impact
- 3280 compensated: approve, disapprove, or limit
- 3280 approved: supervise and book the transaction
- 3280 disapproved: rep must not participate
- Document decision in writing
Selling Away — Classic Fact Pattern
Reps recommending or facilitating off-the-books securities (private placements, promissory notes, real estate LLC interests, crypto offerings) without notifying or getting approval from the firm.
- Solicits firm customers or outsiders
- Offers unregistered or alternative securities
- No notice or false notice to firm
- Compensation in cash, equity, or referral fees
- Firm and rep both face liability
Common examples:
- Recommending an unapproved private placement to clients
- Funneling clients into a promissory note 'investment club'
- Selling pre-IPO shares of a private startup for finder's fees
Common OBA Examples
Activities that trigger Rule 3270 notice but are typically not securities transactions.
- Real estate sales license activity
- Tax preparation or bookkeeping business
- Insurance-only product sales (non-variable)
- Serving on a paid board of directors
- Operating a side business (restaurant, consulting)
Common patterns and traps
The Friendly Favor Disguise
Wrong answers reframe a clear private securities transaction as a personal favor, charitable act, or 'just an introduction' to make notice and approval seem optional. The trap exploits the candidate's instinct to treat informal contexts as outside the rules. In reality, the formality of the relationship is irrelevant; what matters is whether a security is being offered or sold and whether compensation is involved.
A choice saying the rep 'merely introduced friends to the opportunity' and therefore had no notice obligation.
The Compensation Mirage
This trap suggests that absence of cash payment eliminates the notice obligation. Under Rule 3280, written notice is required for ALL private securities transactions, compensated or not — only the approval requirement turns on compensation. Under Rule 3270, 'compensation' includes a reasonable expectation of compensation, even deferred or contingent.
A choice that says 'because the rep received no commission, no notice was required.'
Rule Number Swap
The exam offers the right answer concept but tags it with the wrong rule number, or vice versa. Candidates who memorize numbers without functions get caught. Rule 3270 = OBA; Rule 3280 = private securities transactions / selling away.
A choice citing 'Rule 3270 requires the firm's written approval before the rep accepts compensation for the securities transaction.'
The Supervision Escape Hatch
Wrong answers suggest that once a rep notifies the firm, the firm has no further role. Under 3280, an approved compensated transaction must be recorded on the firm's books and supervised AS IF the firm executed it. The rep doesn't get to operate independently after disclosure.
A choice stating that 'after providing notice, the rep may execute the transaction outside the firm's supervisory system.'
It's Just Insurance / Real Estate
This trap exploits the line between non-securities products (fixed annuities, term life, real estate brokerage) and securities (variable annuities, REITs, real estate LLC interests). The exam tests whether you correctly classify the product. Variable products and pooled investment vehicles are securities and trigger 3280, not 3270.
A choice claiming that selling variable annuities through an outside insurance agency is governed only by Rule 3270.
How it works
Picture this: Maya, a registered rep at Ortega-Bryce Securities, LLC, gets pitched a chance to raise capital for a friend's solar-energy LLC. She'll earn a 5% finder's fee on each subscription. Even though she doesn't think of herself as 'selling securities' — she calls it 'helping out a friend' — those LLC interests are securities, and her solicitation of investors for compensation is a private securities transaction under Rule 3280. She must give Ortega-Bryce prior written notice describing the role, the security, and her compensation, AND obtain the firm's written approval before participating. If approved, the firm records the trades on its books and supervises them. If she also wanted to moonlight as a paid yoga instructor, that's Rule 3270 — written notice only, no approval requirement, but the firm can still object. The exam loves to mix these up, so anchor on one question: is the side activity a securities transaction?
Worked examples
Under FINRA Rule 3280, which statement BEST describes Devon's obligations?
- A Devon needs only to disclose the activity on his next annual compliance attestation, since no firm customers are involved.
- B Devon must provide prior written notice to Pelletier-Quinn AND obtain the firm's prior written approval before participating, and approved transactions must be recorded on the firm's books and supervised. ✓ Correct
- C Because the LLC interests are private and not registered securities, Rule 3280 does not apply and Devon may proceed without firm involvement.
- D Devon must provide prior written notice under Rule 3270 because the activity is an outside business, but no approval is required since none of the investors are firm clients.
Why B is correct: LLC membership interests sold to passive investors are securities, and Devon's solicitation for compensation is a private securities transaction under Rule 3280. The rule requires prior written notice in all cases and, because Devon will be compensated, prior written approval from the firm. If approved, Pelletier-Quinn must record the transactions on its books and supervise them as if executed by the firm. The fact that no firm customers are involved does not remove the rule's application.
Why each wrong choice fails:
- A: Annual attestation is not 'prior written notice.' Rule 3280 requires the notice — and, with compensation, the approval — BEFORE the rep participates, not retroactively. (The Friendly Favor Disguise)
- C: Whether a security is registered with the SEC is irrelevant to Rule 3280's coverage; the rule applies to securities transactions outside the regular course of employment, including unregistered private offerings. (It's Just Insurance / Real Estate)
- D: This is a rule-number swap. Rule 3270 governs non-securities outside business activities. The sale of LLC interests for compensation is governed by Rule 3280, which requires both notice and firm approval. (Rule Number Swap)
Which of the following correctly describes Aiyana's obligation before commencing the real estate activity?
- A No FINRA notice is required because residential real estate brokerage is not a securities activity.
- B Aiyana must provide prior written notice to Marsh-Okafor under Rule 3270, and the firm may impose conditions or prohibit the activity based on conflicts or interference concerns. ✓ Correct
- C Aiyana must obtain Marsh-Okafor's prior written approval under Rule 3280 before earning any commission on a real estate sale.
- D Aiyana need only verbally notify her direct supervisor; Rule 3270 does not require the notice to be in writing.
Why B is correct: Real estate brokerage is a non-securities outside business activity for compensation, which triggers Rule 3270. The rule requires prior written notice to the firm. The firm then evaluates whether the activity will interfere with the rep's responsibilities or create conflicts of interest, and it may impose conditions on, or prohibit, the activity. No firm approval is required by the rule itself, but the firm is not powerless.
Why each wrong choice fails:
- A: Even though the activity is non-securities, Rule 3270 still requires prior written notice whenever the rep engages in an outside business for compensation. (The Compensation Mirage)
- C: Rule 3280 governs private securities transactions, not non-securities outside work. Real estate brokerage is not a securities transaction. (Rule Number Swap)
- D: Rule 3270 expressly requires prior WRITTEN notice. Verbal disclosure to a supervisor does not satisfy the rule. (The Supervision Escape Hatch)
Under FINRA Rule 3280, what is Tomás required to do before purchasing the preferred units?
- A Nothing, because he is investing only his own money and receiving no compensation.
- B Provide prior written notice to Halverson-Reed describing the proposed transaction and his role; firm approval is not required because he is uncompensated. ✓ Correct
- C Obtain prior written approval from Halverson-Reed because all private placements require firm approval regardless of compensation.
- D File the purchase under Rule 3270 as an outside business activity since no securities are being sold to others.
Why B is correct: Rule 3280 requires prior written notice to the firm for ALL private securities transactions, whether or not the rep is compensated. Because Tomás is not receiving selling compensation, the firm is not required to approve the transaction or record it on its books — but it may still impose conditions. Notice is the floor; approval is added when compensation is involved. The exam frequently tests this exact distinction.
Why each wrong choice fails:
- A: This is the classic compensation mirage. Notice under Rule 3280 is required even when the rep receives no compensation; only the approval requirement turns on compensation. (The Compensation Mirage)
- C: Approval is required only for compensated private securities transactions. For uncompensated transactions, the firm need only acknowledge the notice and may, at its discretion, impose conditions. (The Supervision Escape Hatch)
- D: Buying preferred LP units is a securities transaction governed by Rule 3280, not a non-securities outside business under Rule 3270. (Rule Number Swap)
Memory aid
3-2-7-0 = Outside business, just NOTIFY. 3-2-8-0 = Securities away, NOTIFY + (if paid) APPROVE.
Key distinction
Rule 3270 governs non-securities outside work and requires only prior written notice; Rule 3280 governs securities transactions away from the firm and requires prior written notice always, plus prior written approval when the rep is compensated.
Summary
Before doing anything for money outside your firm, ask whether it's a securities transaction — if yes, Rule 3280 controls and you likely need approval; if no, Rule 3270 controls and written notice is the floor.
Practice selling away and outside business activity adaptively
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Start your free 7-day trialFrequently asked questions
What is selling away and outside business activity on the FINRA Series 7 / 63 / 65?
FINRA Rule 3270 requires a registered person to give prior written notice to their member firm before engaging in any outside business activity (OBA) for compensation or a reasonable expectation of compensation. FINRA Rule 3280 separately requires prior written notice — and, when compensation is involved, the firm's prior written approval and supervision — before participating in any private securities transaction (a 'selling away' transaction) that occurs outside the regular course of the rep's employment. The two rules are distinct: 3270 covers non-securities outside work; 3280 covers securities transactions executed away from the firm.
How do I practice selling away and outside business activity questions?
The fastest way to improve on selling away and outside business activity is targeted, adaptive practice — working questions that focus on your specific weak spots within this sub-topic, getting immediate feedback, and revisiting items you missed on a spaced-repetition schedule. Neureto's adaptive engine does this automatically across the FINRA Series 7 / 63 / 65; start a free 7-day trial to see your sub-topic mastery climb in real time.
What's the most important distinction to remember for selling away and outside business activity?
Rule 3270 governs non-securities outside work and requires only prior written notice; Rule 3280 governs securities transactions away from the firm and requires prior written notice always, plus prior written approval when the rep is compensated.
Is there a memory aid for selling away and outside business activity questions?
3-2-7-0 = Outside business, just NOTIFY. 3-2-8-0 = Securities away, NOTIFY + (if paid) APPROVE.
What's a common trap on selling away and outside business activity questions?
Confusing 3270 (notice only) with 3280 (notice + approval if compensated)
What's a common trap on selling away and outside business activity questions?
Assuming 'no compensation' means no notice is required under 3280 — notice is ALWAYS required
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