FINRA regulatory notice 26-12 sets rules for rep-owned PSEs
FINRA Regulatory Notice 26-12, issued June 9, 2026, explained how its rules apply when registered reps use personal services entities under SEC staff relief.
The news: FINRA issued Regulatory Notice 26-12 on June 9, 2026, giving member firms guidance on how FINRA rules apply when registered representatives receive compensation through personal services entities (PSEs). The FINRA regulatory notice follows a November 17, 2025 SEC staff no-action letter that permits rep-owned PSEs to receive transaction-based compensation without registering as broker-dealers, subject to conditions.
Why it matters: Representatives often set up PSEs to receive pay for financial services such as advisory or insurance work and to obtain tax and succession planning benefits. Paying securities commissions to an unregistered entity has historically raised registration problems. The SEC letter and FINRA’s notice together provide a path, but only within defined guardrails.
How the rules apply:
- Rule 2040: Members may pay transaction-based compensation to an unregistered entity if they reasonably support a determination that registration is not required, and may rely on SEC staff no-action letters or interpretations.
- Rules 2320 and 2341: Arrangements involving variable contracts and investment company securities must be agreed to by the member, and compensation is treated as received by the member for FINRA rule purposes.
- Rule 3110: Supervisory systems and procedures must be updated to address the PSE conditions.
- Rules 3270 and 3280: Outside activity rules apply to reps using PSEs for other businesses; FINRA has proposed replacing these with Rule 3290.
By the numbers (conditions):
- All PSE owners and registered personnel must be registered with the same broker-dealer
- The PSE location must be designated a branch or Office of Supervisory Jurisdiction
- The broker-dealer keeps sole and exclusive control over day-to-day securities activities
- The PSE may not hold itself out as a broker-dealer
- Unregistered staff are limited to clerical or ministerial tasks
The big picture: The notice brings a common independent-channel practice inside a formal compliance framework. It also places responsibility squarely on the member firm, which must document its reliance on the no-action letter and supervise the arrangement.
What’s next: Firms that allow PSE compensation should review written supervisory procedures, branch designations and outside activity disclosures, and track FINRA’s proposed Rule 3290 as it moves forward, since it would replace the outside activity rules that currently govern many PSE arrangements.
Prepared with AI assistance from public sources and reviewed under our editorial policy. Not investment advice.
