FINRA is pushing back on criticism of proposed changes to its rules on reps’ outside business activities, including claims that advisors would have to clear any of their own purchases of crypto assets with their broker/dealers.

According to a statement published by FINRA on Monday, recent claims in the media argued the proposed changes to rules regarding outside business activities would “require associated persons to report to and receive approval from their broker/dealers to personally purchase Bitcoin, a beach house, insurance or even make a deposit or withdrawl at a bank.”

“This claim is false,” the statement read. “The proposal explains that these types of personal activities are, in fact, excluded from the rule.”

FINRA’s responses mirror the critiques lobbed by Edelman Financial Engines founder Ric Edeleman in a recent op-ed in ThinkAdvisor, in which he called FINRA’s proposed changes “absurd” and said they would “push crypto back into the Dark Ages.”

In March, FINRA requested public comment on proposed revisions that would combine two existing rules (Rule 3270, “Outside Business Activities of Registered Persons,” and Rule 3280, “Private Securities Transactions of an Associated Person”) into a single rule. The rule will exclude the need to report side businesses that FINRA believes amount to “low-risk activities that create white noise” (examples include refereeing sports games, driving for a car service or bartending on weekends). 

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According to FINRA’s response, the proposal doesn’t mandate new reporting or approval requirements. Instead, it argues that the rules cut reporting requirements to help b/ds “focus on investment-related outside activities,” which it believes are higher risk.

FINRA also argued that much of what Edelman was worried about is excluded from reporting requirements, including “personal investments in non-securities” (that would include Bitcoin) and the “purchase, sale, rental or lease” of main homes or vacation spots. Finally, FINRA asserted that b/ds would have “new obligations” with the new rule.

“The proposal does not change the existing obligations regarding unaffiliated investment adviser activity but explicitly asks whether FIRNA should reduce or eliminate current obligations for unaffiliated investment adviser activity,” the response reads. “In addition, the proposal eliminates such obligations for outside investment adviser activities conducted at a broker/dealer’s affiliate.”

The comment period closes May 13, but FINRA has already posted dozens of comments, including many from advisory firms opposing the proposed changes (many letters share similar or identical language). According to one letter from John Picardi, the owner of the Atlanta-based firm Bison Wealth, the changed rules may require reps to provide information about advisory clients to unaffiliated b/ds.

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“Forcing an investment advisor to provide non-public personal information of an advisory client to an unaffiliated broker/dealer violates the privacy rights of the advisory client under federal and state law and undermines the confidentiality that advisory clients expect and deserve in their advisory relationship,” the letter read.