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FINRA plans to update rule setting $100 limit on broker-client gifts

On Behalf of | May 24, 2023 | FINRA Compliance

Changes are in store for the Financial Industry Regulatory Authority’s rule involving gift limits for brokers, AdvisorHub reports.

FINRA Rule 3220, known as the Gifts Rule, prohibits any member or person associated with a member, directly or indirectly, from giving anything of value in excess of $100 per year to any person where such payment is in relation to the business of the recipient’s employer. The rule also requires members to keep separate records regarding gifts and gratuities. Rule 3220 is aimed at avoiding any improprieties resulting from the giving of gifts and preserving an employee’s duty to act in the best interests of that customer.

Plans are now underway for a proposal to update the $100 annual limit, according to FINRA’s chief legal officer Robert Colby. Speaking at the authority’s recent annual conference, he said FINRA is collaborating on the new proposal with the Securities and Exchange Commission, adding that “This change is coming.” Colby said that the updated limit would take inflation into account, but he did not provide a timetable for when the plan would be completed.

In 2016, FINRA proposed raising the limit on gifts to $175 per person per year and including a threshold below which firms would not have to keep records of gifts given or received. But Colby said the SEC delayed the proposal while developing its Regulation Best Interest rules and did not end up taking action on it.

FINRA has noted that its Gifts Rule does not prohibit “ordinary and usual business entertainment” (such as an occasional meal, sporting event, theater production or comparable entertainment event) provided that the entertainment “is neither so frequent nor so extensive as to raise any question of propriety.”

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