FINRA has adopted updates to the Gifts Rule (Rule 3220 – Influencing or Rewarding Employees of Others) to modernize thresholds and clarify how gifts should be valued, aggregated, and supervised. The rule continues to focus on preventing improper influence in business relationships, like the intent behind the Foreign Corrupt Practices Act and Pay-to-Play rules. FINRA also reaffirms that broker-dealers must maintain reasonable supervisory systems and appropriate books and records regarding gifts.
Below is a summary of the key changes and interpretive clarifications.
Key Updates to FINRA’s Gifts Rule
Annual Gift Limit Increased
The maximum value of gifts a firm or its associated persons may provide to an individual in a year has increased from $100 to $300.
Gifts Provided During Business EntertainmentÂ
Gifts provided in connection with business entertainment count toward the $300 limit unless they qualify as:
- personal gifts,
- de minimis items, or
- promotional or commemorative items.
Valuation Requirements
Firms must determine the value of gifts using the higher cost or market value, excluding taxes and delivery fees.
- Event tickets must be valued at the higher cost or face value.
- Gifts provided to multiple recipients must be prorated per individual.
Aggregation Standards
Firms must aggregate all gifts given by the firm and its associated persons to the same recipient.
Written supervisory procedures must specify whether aggregation follows:
- the calendar year,
- the fiscal year, or
- a rolling 12-month period.
Aggregation does not apply to personal gifts, de minimis items, or promotional/ commemorative items.
Personal Gifts
Personal gifts are generally excluded from the Gifts Rule unless they relate to the recipient’s business. Examples include wedding gifts or gifts for the birth of a child.
When assessing whether a gift is truly personal, firms should consider:
- the nature of any preexisting personal or family relationship; and
- who paid for the gift.
If the firm paid for or reimbursed an associated person, the gift is presumed business-related and is subject to the $300 limit and aggregation rules.
Bereavement Gifts
Reasonable and customary bereavement items, such as flowers or food platters, are exempt from the Gifts Rule.
De Minimis, Promotional, and Commemorative Items
De minimis and promotional gifts remain exempt if their value is substantially below the $300 limit. Examples include:
- De minimis items: modest pens, notepads, and small desk items.
- Promotional items: firm logo umbrellas, tote bags, and shirts.
Commemorative items that are solely decorative (e.g., Lucite tombstones or plaques) are also exempt. When commemorative items have practical utility, they become subject to the $300 threshold.
Charitable Donations Relating to Federally Declared Natural Disasters
Donations made in response to federally declared natural disasters are exempt because they are not viewed as business-related gifts.
Supervision and Recordkeeping
Firms must maintain separate gift records along with sufficient documentation demonstrating monitoring, reporting, review and overall compliance with the rule.
Compliance Considerations for Broker-Dealers
Firms may choose to implement internal gift thresholds lower than FINRA’s limit or prohibit gifts entirely. Effective compliance requires a robust supervisory framework, including:
- clear written policies,
- preapproval and/or reporting processes,
- periodic staff attestations, and
- ongoing monitoring and documentation.
Without strong controls, firms may choose to restrict or disallow gift giving to mitigate regulatory risk.
ACA Is Here to Help
Connect with an expert for assistance with reviewing and enhancing your gifts and entertainment policies, supervisory procedures, and recordkeeping processes to ensure compliance with FINRA Rule 3220.