Private Securities Transactions (FINRA 3280)

To meet the private securities transactions (finra 3280) requirement, you must require associated persons to provide advance written notice of any private securities transaction, assess whether compensation is involved, and either prohibit the activity or approve and supervise it under your firm’s supervisory system. Build an intake-to-decision workflow with documented approvals, supervision, and records. (FINRA Rule 3280) (FINRA Rule 3110)

Key takeaways:

• Require advance written notice before any participation in a private securities transaction, including expected compensation. (FINRA Rule 3280)
• If approved, treat the activity as firm business for supervision and recordkeeping through your supervisory system. (FINRA Rule 3280) (FINRA Rule 3110)
• Exams focus on evidence: disclosures received, decisions made, rationale, and ongoing supervision artifacts.

“Selling away” risk shows up when an associated person participates in securities activity outside the firm’s products, platforms, and supervision. FINRA Rule 3280 addresses this by forcing the activity into a controlled lane: pre-clear it, decide whether it is permitted, and if it is permitted, supervise it like firm business with a clear record trail. (FINRA Rule 3280) (FINRA Rule 3110)

Operationally, your success depends less on the written policy and more on whether your firm can prove three things during an exam: (1) associated persons know they must disclose before acting, (2) the firm makes consistent, documented determinations, and (3) approvals trigger real supervision and recordkeeping, not a “rubber stamp.” (FINRA Rule 3280) (FINRA Rule 3110)

This page gives requirement-level implementation guidance you can put into production quickly: scope, roles, a step-by-step workflow, the minimum evidence set to retain, and the exam questions that expose weak controls. The goal is a repeatable process that produces clean artifacts every time an associated person requests approval, and that also detects undisclosed activity through supervision. (FINRA Rule 3280) (FINRA Rule 3110)

Plain-English interpretation (what the rule requires)

FINRA Rule 3280 requires that no associated person participate “in any manner” in a private securities transaction unless they first give the member firm advance written notice that describes the transaction and states whether they expect compensation. (FINRA Rule 3280)

From an operator’s point of view, the requirement breaks into two control obligations:

1. Pre-activity disclosure and decisioning: You need a formal mechanism for advance written notice, plus a consistent review and decision process. (FINRA Rule 3280)
2. Supervision if approved: When the firm permits the activity, it must be brought under the firm’s supervisory system, which ties directly to your Rule 3110 supervisory obligations. (FINRA Rule 3280) (FINRA Rule 3110)

Who it applies to (entity and operational context)

Covered entity

• FINRA member broker-dealers and their supervisory and compliance functions, because Rule 3280 is a member-firm obligation to control associated persons’ participation. (FINRA Rule 3280)

Covered people and scenarios

• Associated persons (registered and non-registered, as applicable within your firm’s supervision model) who may be exposed to outside deals through clients, friends, family, networking groups, issuers, or third parties. (FINRA Rule 3280)

Operational contexts where risk is highest

• Outside business activities that “drift” into capital raising or referrals
• Private placements offered away from firm platforms
• Customer introductions to issuers or funds with informal “finder” compensation expectations
  These contexts matter because Rule 3280 captures participation “in any manner,” so your intake form and training need to reflect broad triggers, not just “I sold a security.” (FINRA Rule 3280)

Regulatory text

“No person associated with a member shall participate in any manner in a private securities transaction except in accordance with Rule 3280, including advance written notice to the member describing the transaction and compensation expectations.” (FINRA Rule 3280)

What the operator must do with this text

• Implement an advance written notice requirement that triggers before participation. “Advance” has to be operationally enforced by workflow gates (for example, no approval, no participation). (FINRA Rule 3280)
• Collect a description of the transaction that is detailed enough for a review decision, not a one-line summary. (FINRA Rule 3280)
• Capture compensation expectations explicitly, including indirect compensation and “not sure yet” responses that require follow-up. (FINRA Rule 3280)
• Tie approvals to supervision under your WSPs, using the same supervisory spine you use for other firm business under Rule 3110. (FINRA Rule 3280) (FINRA Rule 3110)

What you actually need to do (step-by-step)

Step 1: Define the “PST trigger” and put it in writing

Create a one-page internal standard (policy + WSP procedure) that answers:

• What counts as a private securities transaction for your firm’s purposes
• What “participate in any manner” includes (examples: introductions, referrals, sharing materials, attending pitch meetings, handling paperwork)
• The pre-clear requirement and consequences for noncompliance
  This is your interpretive backbone for consistent reviews. (FINRA Rule 3280) (FINRA Rule 3110)

Step 2: Build an intake workflow that forces complete notice

Implement a standardized PST request form (ticket, portal, or compliance inbox with a required template). Minimum fields to capture:

• Issuer name, product type, and a narrative description
• Role of the associated person (what they will do and not do)
• Any customer involvement (including which customers)
• Compensation expected (cash, equity, forgiveness of debt, future employment, “finder” fees)
  Make “compensation expected” a required attestation with a clear option for “none.” (FINRA Rule 3280)

Step 3: Triage and route to decision owners

Route every request to:

• Compliance review for rule applicability, conflicts, and documentation completeness
• Business/supervisory review for whether the firm will permit it and under what conditions
  Assign a named approver role (not a generic mailbox) so approvals have accountable ownership. (FINRA Rule 3280) (FINRA Rule 3110)

Step 4: Make a documented determination (approve with conditions, or prohibit)

Create a decision template that captures:

• Decision outcome (approved/prohibited)
• Rationale (brief but specific to facts)
• Conditions (if approved): permitted activities, prohibited activities, communications limits, customer restrictions, required disclosures, supervision plan
  Avoid “approved” with no conditions or supervision notes; that reads as non-supervised outside activity during exams. (FINRA Rule 3280) (FINRA Rule 3110)

Step 5: If approved, convert to supervised activity under Rule 3110

Operationalize the supervision step. Examples of what “supervise it” means in practice:

• Identify the responsible principal/supervisor for the activity
• Define what gets reviewed (communications, offering materials, customer lists, attestations)
• Ensure record capture aligns to your firm’s supervisory and books-and-records practices under your WSP structure
  The key is that approval is the start of supervision, not the end. (FINRA Rule 3280) (FINRA Rule 3110)

Step 6: Train, attest, and repeat

• Add PST training to onboarding and annual compliance training
• Require periodic attestations that include PST and related outside activity prompts
• Make escalation easy: a “ask compliance first” channel for borderline cases
  Training content should mirror the intake triggers and real examples, not definitions alone. (FINRA Rule 3280) (FINRA Rule 3110)

Step 7: Add detection controls for undisclosed activity

Rule 3280 is disclosure-driven, but exams also test supervision effectiveness. Add detection steps into your Rule 3110 supervisory controls:

• Review exception reports and red flags (customer complaints, outside emails, unexpected wires, marketing activity)
• Supervisory outreach when a rep’s outside activity profile changes
  Document what you check and what you did with what you found. (FINRA Rule 3110) (FINRA Rule 3280)

Required evidence and artifacts to retain

Build an “exam-ready” PST file per request. Minimum artifacts:

• PST notice/request form (advance written notice, complete description, compensation statement) (FINRA Rule 3280)
• Compliance review notes and follow-up Q&A (what you asked, what they clarified) (FINRA Rule 3280)
• Approval/prohibition decision record with rationale and conditions (FINRA Rule 3280)
• Supervisory assignment and supervision plan (named supervisor, scope of review) (FINRA Rule 3110)
• Ongoing supervision evidence if approved (reviews performed, issues raised, resolution) (FINRA Rule 3110)
• Training completion and attestations that reference PST disclosure obligations (FINRA Rule 3280)

Daydream fit (where it naturally helps): teams often lose time proving “operating effectiveness” because artifacts sit in email threads and shared drives. A workflow system like Daydream can centralize request intake, approvals, conditions, and evidence linking so you can produce a clean PST file on demand without reconstructing history.

Common exam/audit questions and hangups

Expect examiners (or internal audit) to pressure-test these points:

• Show the written process requiring advance written notice and the actual notices received. (FINRA Rule 3280)
• How do you determine whether an activity is a PST and whether compensation is expected? (FINRA Rule 3280)
• Who approves, and how do you prevent inconsistent approvals across branches? (FINRA Rule 3110)
• For approved PSTs, show supervision evidence, not just the approval email. (FINRA Rule 3280) (FINRA Rule 3110)
• How do you detect undisclosed activity outside the intake channel? (FINRA Rule 3110)

Hangups usually come from gaps between policy and practice: a good policy with thin evidence trails fails quickly under sampling.

Frequent implementation mistakes (and how to avoid them)

1. Treating PST as only “private placements.” Fix: train on “participate in any manner” with concrete triggers and examples. (FINRA Rule 3280)
2. Accepting vague notices. Fix: require specific fields and attach supporting documents when available (pitch deck, issuer summary). (FINRA Rule 3280)
3. Approving without a supervision plan. Fix: approval template must include supervisor assignment and review cadence expectations under WSPs. (FINRA Rule 3110) (FINRA Rule 3280)
4. Letting compensation be “TBD.” Fix: treat “TBD” as incomplete notice; require follow-up and amended notice before participation. (FINRA Rule 3280)
5. No second line visibility. Fix: compliance owns the central log and can report trends, repeat issuers, and repeat requesters. (FINRA Rule 3110)

Enforcement context and risk implications (without overstating)

No public enforcement sources were provided in the source catalog for this page, so this section focuses on practical risk. A Rule 3280 breakdown can create investor harm, customer complaints, and supervisory findings because the activity sits outside firm controls unless you force it into an approval-and-supervision lane. Your highest practical exposure comes from inconsistent decisions, missing documentation, and failure to supervise approved activity. (FINRA Rule 3280) (FINRA Rule 3110)

Practical 30/60/90-day execution plan (no calendar promises)

First 30 days: Stabilize intake and stop the bleeding

• Publish a PST notice requirement and a single submission channel. (FINRA Rule 3280)
• Deploy the standardized request form and decision template. (FINRA Rule 3280)
• Stand up a central PST log owned by Compliance. (FINRA Rule 3110)
• Run a targeted training for supervisors and high-risk teams (wealth management, private client, alternatives). (FINRA Rule 3280)

Days 31–60: Make approvals supervisable

• Update WSPs to map PST approvals into your Rule 3110 supervisory structure (assignment, review steps, escalation). (FINRA Rule 3110) (FINRA Rule 3280)
• Implement file standards so every request produces a complete evidence pack. (FINRA Rule 3280)
• Add attestations that explicitly ask about PST participation and compensation. (FINRA Rule 3280)

Days 61–90: Add detection and governance reporting

• Add surveillance or supervisory checks aimed at uncovering undisclosed outside securities activity, and document outcomes. (FINRA Rule 3110)
• Establish a governance rhythm: periodic management reporting from the PST log (themes, repeat issuers, exceptions, overdue supervision items). (FINRA Rule 3110)
• Test operating effectiveness with a small internal sample: pick recent PST requests and verify end-to-end artifacts and supervision evidence. (FINRA Rule 3280) (FINRA Rule 3110)

Frequently Asked Questions

What counts as a “private securities transaction” for Rule 3280 purposes?

The rule is triggered when an associated person participates in any manner in a private securities transaction outside the firm’s normal supervision lane, and the associated person must provide advance written notice. Use an intake form that captures what they will do, who is involved, and whether compensation is expected. (FINRA Rule 3280)

Do I need notice if the associated person says they will not be paid?

Yes, the notice requirement still matters because the firm needs the description of the transaction and a clear statement about compensation expectations. Treat “no compensation” as an attested field and require follow-up if facts change. (FINRA Rule 3280)

What does “participate in any manner” mean operationally?

Don’t limit your trigger to “selling.” Your policy should treat introductions, referrals, distributing materials, attending pitch meetings, or helping complete paperwork as participation that requires pre-clearance. (FINRA Rule 3280)

If we approve a PST, what supervision evidence should we expect to show?

You should be able to show who supervised it, what they reviewed, what issues they found, and how issues were resolved, consistent with your supervisory system. An approval record alone is weak evidence. (FINRA Rule 3280) (FINRA Rule 3110)

How should we handle “TBD” compensation or a future success fee?

Treat it as incomplete notice until the associated person provides a clear compensation expectation statement. If compensation changes later, require an amended notice and a refreshed approval decision before further participation. (FINRA Rule 3280)

Can this be handled through our outside business activities process?

You can integrate workflows, but ensure the PST-specific elements are captured: advance written notice, transaction description, and compensation expectations, plus an approval decision that triggers Rule 3110 supervision if permitted. (FINRA Rule 3280) (FINRA Rule 3110)