The Securities and Exchange Commission has been given more time to consider a proposed rule change by the Financial Industry Regulatory Authority that would raise the limit on gifts.
According to a report by Think Advisor, FINRA has given the SEC an extension until Feb. 12 for action on the proposal to amend FINRA Rule 3220 (Influencing or Rewarding Employees of Others) The extension was filed Dec. 2.
Currently, the rule states, “No member or person associated with a member shall, directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of one hundred dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity.”
In a move aimed at keeping pace with the rate of inflation, FINRA has proposed raising the limit on gifts by a registered person from $100 to $300 per year. The last increase was approved by the SEC in 1992, from $50 to $100.
FINRA’s original plan was to raise the limit to $250, but feedback from the industry convinced the regulator to boost it to a higher amount, which is expected to account for the rate of inflation over the next ten years.
“FINRA continues to believe that a $300 gift limit is appropriate — it will facilitate compliance while protecting investors from improprieties, such as conflicts of interest, that may arise when a member or an associated person gives items of value to an employee of another person, such as an institutional customer, vendor or counterparty (‘Institutional Customer’) with the hope of strengthening the business relationship with the Institutional Customer,” FINRA said.
The authority has also called for other modifications to the Gifts Rule. These include codifying existing guidance that the rule does not apply to personal gifts, items of de minimis value, promotional or commemorative items, or donations due to federally declared major disasters. It also would make clear that the Gifts Rule does not apply to gifts to individual retail customers. Furthermore, it would extend the $250 limit to other rules that cover similar expenses, including those impacting direct participation programs, variable contracts, investment company securities and corporate financing.
In addition, FINRA is asking that the SEC grant it the authority to issue conditional or unconditional exemptions for “good cause shown,” so that the authority can consider unique circumstances across various types of firms.
FINRA said it “believes the proposed rule change would promote efficiency without reducing protection for investors and the public interest,” and added that boosting the gift limit would “continue to permit the exchange of business courtesies while helping to guard against excessiveness.”
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