Regulatory FrameworkQuestion 397 of 398
A representative is offered, and wants to accept, an appointment to the board of directors of a private company in exchange for a fee. Under FINRA rules, this is best handled as:
a.A private securities transaction requiring firm approval
b.A reportable gift under the $100 limit
c.A political contribution subject to MSRB G-37
d.An outside business activity requiring prior written notice to the firm
Explanation
Serving as a director of an outside company for compensation is an outside business activity under FINRA Rule 3270, requiring prior written notice to the employing member firm. The firm then evaluates whether the activity raises conflicts or must be limited. This is different from a private securities transaction, which involves effecting securities transactions away from the firm.
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