FINRA Rule 3220 sets strict limits on the gifts and gratuities that financial professionals can give or receive. Gifts and gratuities are subject to a $100 per year, per person limitation. This includes whether or not there was a pre-existing relationship between the associated person and the recipient and whether the associated person paid for the gift out of their own personal bank account without reimbursement from the firm. However, the Rule does not apply to gifting or receiving gifts such as a wedding gift or a congratulatory gift for the birth of a child. A record of all payments or gifts should be kept, proving members are abiding by this Rule.
Likewise, Rule 3221, Non-Cash Compensation, prohibits members and their associated persons from giving or receiving such gifts in connection with the sale of specified products. This rule permits business entertainment provided by “offerors” to representatives of third-party broker-dealers and their guests that is not subject to the $100 limit, so long as the entertainment is not frequent, not extensive and not based upon preconditioned achievements related to the business.
Many may wonder in the midst of a global pandemic if Rule 3220 is still applicable to virtual business or video meetings. As in person meetings and events are no longer encouraged or permitted, business has shifted exclusively toward virtual meetings and virtual interactions. Due to the shift, FINRA recently released updated guidance andan additional FAQ regarding interactive virtual business meetings. The FAQ addresses the implications of providing food and beverage to clients as part of a virtual event. It has been decided that in this new virtual world, the $100 limit is not applicable, so long as the cost of the food and/or beverages as well as the frequency of the meetings does not raise questions of propriety. The main distinction is the difference between a member personally hosting employees rather than simply giving those employees something of value.
If you are a host of a virtual meeting or virtual event, there are several factors to keep in mind:
-Control who can participate in the meeting;
-Control who can interact with each participant in the meeting; and
-Control who will remain visible throughout the entire meeting.
Similar to the original recordkeeping rule, members should maintain records of virtual events to include descriptions, amounts and the value of supplies purchased. It is important for firms tooutline gifts and gratuities procedures within their compliance procedures.
To read the FAQ in its entirety, please click here.