Private Securities Transactions

Expect a fact pattern, not a definition: a rep arranges a private placement, hedge fund, or promissory note for customers away from the firm, and you choose the required firm response. Every PST needs prior written notice to the firm; the “tell” is whether selling compensation flows to the rep, which adds a second layer — the firm’s written approval, recording the trades on its books, and supervising them as if executed by the firm (this is FINRA Rule 3280). A favorite wrong answer lets a compensated rep proceed on notice alone — but silence isn’t enough; the firm must affirmatively approve.

The classic trap is confusing this with Outside Business Activities (Rule 3270): if the venture involves a securities transaction, it’s a PST, and the stricter approve-and-supervise standard governs — OBA needs only prior written notice. Don’t conflate it with gifts (a $300 per-person annual cap as of 2026; some older banks still say $100) either; PST is about whose books the trade lives on. Memory hook: “selling away” means the firm can’t supervise what it never sees, so undisclosed PSTs draw the harshest sanctions.