Registration and Employee Conduct: U4, U5, OBAs, and Private Securities Transactions

Two rules sit next to each other in FINRA’s rulebook and get confused constantly.

Rule 3270 covers outside business activities. You must give your firm prior written notice. The rule doesn’t require the firm to approve it.

Rule 3280 covers private securities transactions — selling away. You must give prior written notice and, if you’re being compensated, the firm must approve or disapprove in writing. Approved, the transaction goes on the firm’s own books and gets supervised as if the firm had executed it.

Notice versus approval. The trigger is whether a security is involved and whether you’re getting paid.

Unlike most SIE material, this topic is about to apply to you personally. The forms below will carry your name, and the disclosures on them follow you for the rest of your career.

The short answer

Form U4 — the application that registers you. Your firm files it; you sign it. It carries disclosure questions covering criminal, regulatory, civil judicial, customer-complaint and financial history — including bankruptcies, liens and judgments. It also contains a pre-dispute arbitration agreement.

Form U5 — the termination notice. Your firm must file it within 30 days of your leaving and give you a copy at the same time. It states whether you left voluntarily, were permitted to resign, or were discharged.

Amendments — file within 30 days of learning of facts requiring a change. For events causing statutory disqualification, within 10 days.

Rule 3270 (outside business activities) — prior written notice.

Rule 3280 (private securities transactions) — prior written notice, plus written approval if compensated.

Continuing education — the Regulatory Element is now annual, due December 31 each year, for each registration category you hold. It was every three years until January 1, 2023.

The full answer

Form U4: what you’re actually signing

The Uniform Application for Securities Industry Registration or Transfer is filed by the firm through FINRA’s Central Registration Depository. You don’t file it yourself, but you sign it, and you’re responsible for its accuracy.

The disclosure sections cover more than people expect:

Category	What’s disclosed
Criminal	Felony charges and convictions; specified misdemeanours
Regulatory	Actions by the SEC, other regulators, SROs, or foreign authorities
Civil judicial	Injunctions, findings of fraud or securities-law violations
Customer complaint	Complaints, arbitrations and civil suits alleging sales-practice violations
Termination	Discharges and permitted resignations
Financial	Bankruptcies within ten years, unsatisfied judgments, liens, compromises with creditors

That last row surprises candidates. Your personal financial history is disclosable. A bankruptcy within the past ten years, an outstanding tax lien, or an unsatisfied judgment goes on your U4 and becomes visible on BrokerCheck.

The U4 also contains a pre-dispute arbitration agreement. By signing, you agree to arbitrate disputes with your firm rather than litigate them. That’s a substantive legal commitment, not a formality, and it’s worth understanding before you sign rather than after a dispute arises.

Keeping it current: two clocks

The U4 must be kept current at all times through supplementary amendments. There are two deadlines, and the exam tests the distinction.

Situation	Deadline
Ordinary amendment	30 days after learning of the facts
Amendment involving a statutory disqualification	10 days after the disqualification occurs

The shorter clock exists because statutory disqualification may make the person ineligible to remain associated. It’s not a paperwork delay the regulator is willing to tolerate.

Note the different triggers, too: the 30-day clock runs from learning of the facts; the 10-day clock runs from when the disqualification occurs.

Form U5: the one that follows you

When you leave a firm, the firm must file a Uniform Termination Notice within 30 days of termination and concurrently provide you with a copy.

The form states the reason for termination — voluntary, permitted to resign, discharged — and whether you were under internal review for fraud, wrongful taking of property, or violation of investment-related rules at the time you left.

Three things worth knowing:

It’s permanent. The U5 sits on your CRD record. Future employers see it. Much of it surfaces on BrokerCheck, which is public.

Your firm writes it, not you. A departing rep doesn’t control the language. If the U5 is inaccurate or defamatory, the remedy is a CRD expungement proceeding — a real and difficult process, not a correction request.

FINRA keeps jurisdiction for two years. After your U5 is filed, FINRA retains authority to investigate and discipline you for conduct during your registration for two years. Leaving the industry doesn’t close the file.

The firm must also amend the U5 within 30 days of learning facts that make the original filing inaccurate — which is how “terminated voluntarily” can later become “terminated after internal review.”

Rule 3270: outside business activities

No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person — or be compensated, or reasonably expect compensation, from any other person for a business activity outside the scope of their relationship with the firm — unless they have provided prior written notice to the member.

The rule requires notice. It does not, by its own terms, require approval.

But the firm isn’t passive. On receiving notice, it must consider whether the activity will interfere with or compromise your responsibilities to the firm or its customers, or whether customers and the public might view it as part of the firm’s business. The firm must then evaluate whether to impose conditions or limitations — including prohibiting the activity entirely — and keep a record of what it did.

So in practice many firms require approval as a matter of their own written supervisory procedures. The rule’s floor is notice; firms routinely build above it.

What counts is broader than people assume. Being on a non-profit’s board, running a rental property business, driving for a rideshare service, or holding a part-time job — all are outside business activities requiring prior written notice.

Rule 3280: private securities transactions

A private securities transaction is any securities transaction outside the regular course or scope of your employment with your firm. Commonly called selling away.

You must give prior written notice describing the proposed transaction in detail, your proposed role in it, and whether you have received or may receive selling compensation.

That last element determines what happens next:

	Firm’s obligation	If it proceeds
With compensation	Must approve or disapprove in writing	Transaction recorded on the firm’s books and records; firm supervises your participation as if it had executed the trade itself
Without compensation	Must provide prompt written acknowledgment; may impose conditions at its discretion	Proceeds subject to any conditions the firm sets

If the firm disapproves a compensated transaction, you may not participate in any manner. Not as an introducer, not for a referral fee, not at all.

Why 3280 is enforced so hard

Selling away is one of the more common causes of serious disciplinary action, and the reason is structural.

When a rep sells an unapproved investment to their own clients, those clients believe they’re dealing with a supervised representative of a regulated firm. They aren’t — the firm doesn’t know the transaction exists and can’t supervise it. If the investment fails or turns out to be fraudulent, there’s no supervisory record, no approval, and often no recourse.

The compensation requirement in the rule is what closes that gap. Approve a compensated transaction and the firm takes on responsibility for it by putting it on its own books.

Continuing education: the part most study material has wrong

Two components.

Regulatory Element — training on rule changes and regulatory developments, delivered by FINRA through the CE platform on FinPro Gateway.

Firm Element — an annual training programme the firm designs for its own registered persons.

Here’s the change. Since January 1, 2023, the Regulatory Element must be completed annually, by December 31, for each registration category you hold.

Before that, it ran on a three-year cycle: within 120 days of your second registration anniversary, then every three years after. A great deal of prep material still describes that cycle. It has been wrong since 2023.

Two related changes arrived at the same time: content is now tailored to each registration category rather than generic, and the Firm Element requirement was extended to all registered persons rather than only those with customer contact. FINRA and the CE Council publish the coming year’s topics by October 1 of the prior year.

Miss the December 31 deadline and you’re designated CE inactive — prohibited from performing any activity requiring registration, including soliciting business and receiving commissions, until you complete it. Two consecutive years CE inactive and your registration terminates.

Statutory disqualification

Certain history bars a person from association with a member firm. The categories include:

• Felony conviction or guilty plea within the past ten years
• Certain misdemeanours involving securities, fraud, bribery, perjury, or wrongful taking of property
• A bar or suspension by the SEC, the CFTC, or an SRO
• Expulsion from an SRO
• Making a false or misleading statement on a registration application

That last one matters more than its position on the list suggests. Omitting a disclosable event from your U4 can itself be a disqualifying act — meaning the concealment is often more damaging than whatever was concealed.

A firm may seek permission to associate with a statutorily disqualified person through an eligibility proceeding, but it’s an exception requiring affirmative approval, not a default.

Two adjacent rules worth knowing

Rule 3210 — accounts at other firms. Before opening or maintaining a securities account at another broker-dealer, you need your employer’s prior written consent, and you must notify the executing firm in writing of your association.

Fingerprinting. Associated persons must be fingerprinted under SEC Rule 17f-2, which is how the criminal history behind U4 disclosure gets verified rather than taken on trust.

Common misconceptions

“Outside business activities need firm approval.” Rule 3270 requires prior written notice. The firm can prohibit the activity, and many firms require approval in their own procedures — but the rule’s requirement is notice.

“Private securities transactions just need notice too.” Notice always. Plus written approval or disapproval when compensation is involved.

“Selling away only matters if I’m paid.” Notice is required either way. Compensation changes what the firm must do about it.

“The Regulatory Element is every three years.” Annual since January 1, 2023, due December 31, for each registration category held.

“CE inactive just means I need to catch up.” It means you cannot perform registered activities or receive commissions until you complete it. Two consecutive years and the registration terminates.

“My U4 only covers securities issues.” It covers criminal, regulatory, civil judicial, customer complaint, termination and financial history — bankruptcies, liens, unsatisfied judgments.

“I can amend my U4 whenever.” 30 days from learning of the facts; 10 days for statutory disqualification events.

“Once I leave, FINRA can’t touch me.” FINRA retains jurisdiction for two years after your U5 is filed.

“My firm will write whatever I ask on the U5.” Your firm controls the language. Changing it afterward means an expungement proceeding.

What to do with this info

1. Fix the 3270/3280 split in one line. Outside business activity: notice. Private securities transaction with compensation: notice and written approval.
2. Memorise the two U4 clocks — 30 days ordinarily, 10 days for statutory disqualification.
3. Treat the CE change as a staleness test. If your study material says the Regulatory Element is every three years or tied to your second anniversary, it predates 2023 and other facts in it are likely stale too.
4. Take the financial disclosures seriously if you’re entering the industry. A bankruptcy or lien is disclosable, and failing to disclose it is worse than the underlying event.
5. Read the U4 before you sign it, particularly the pre-dispute arbitration agreement.
6. Remember the two-year tail. Conduct during registration stays actionable for two years after you leave.

Related resources

• Communications with the public: Rule 2210 — the other conduct rule that governs what registered persons may do
• Suitability, KYC and Reg BI — the standards governing recommendations you make while registered
• Prohibited activities and trading violations — where conduct failures become enforcement matters
• Does the SIE exam expire? — how the U5 starts a second four-year clock on your qualification
• The SIE exam glossary — 170 terms in plain English, including the registration vocabulary above
• Free SIE practice exam — a domain-scored diagnostic