meta_id 3228188

On June 9, 2026, the Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 26-12 providing guidance on how FINRA rules apply to personal services entities (PSEs) following a Securities and Exchange Commission (SEC) no-action letter issued on November 17, 2025. The SEC no-action letter permits broker-dealers to pay transaction-based compensation (TBC) directly to PSEs owned by registered representatives without requiring separate broker-dealer registration for the PSE. This arrangement is subject to specific conditions: PSE owners and all registered representatives at the PSE must be registered with the same broker-dealer; the PSE must be designated as a branch office or Office of Supervisory Jurisdiction; the broker-dealer must maintain sole control over registered representatives' securities activities and approve all compensation payments; and the PSE may retain only amounts necessary for overhead and administrative expenses. FINRA's guidance clarifies how existing FINRA rules—specifically Rules 2040 (Payments to Unregistered Persons), 2320 (Variable Contracts), and 2341 (Investment Company Securities)—apply under the no-action letter framework. Members complying with the SEC no-action letter's conditions will satisfy these FINRA rules. The guidance emphasizes that broker-dealers must update supervisory systems under FINRA Rule 3110 to address PSE arrangements, including registration verification, member control over day-to-day activities, PSE business limitations, restrictions on unregistered personnel, payment administration, and recordkeeping obligations. Communications with customers must comply with FINRA Rule 2210 and clearly disclose that securities activities are conducted through the member. The guidance does not impose new requirements beyond those established in the SEC no-action letter. FINRA's notice applies to PSE arrangements entered into on or after November 17, 2025.