by Howard Haykin

So, how does one operate within FINRA Rule 3220 and its $100 gift limitation when a pricier personal gift is in order? Such a question was recently posed in Financial-planning.com:

A client invited me to their child’s bar mitzvah. I know I’m generally limited to a $100 gift, but this client is very wealthy and $100 seems very low. I know there’s an exception for bereavement gifts, but are there other exceptions to the $100 limit?

In his analysis, the writer - Alan Foxman (a senior consultant and VP at NCS Regulatory Compliance, and a law partner at Dew Foxman & Haugh) - referred to a proposed amendment to FINRA Rule 3220 that would, among other things, raise the limit to $175. The proposal would also provide, in part, that “gifts given for infrequent life events - e.g., a wedding gift or congratulatory gift for the birth of a child - are not subject to the restrictions of the gifts rule or its recordkeeping requirements provided the gifts are customary and reasonable, personal in nature and not in relation to the business of the employer of the recipient.” Yet, because the 2016 proposal was never incorporated into Rule 3220, Mr. Foxman suggested the following: 

Run gift plans past your firm’s compliance department. But it seems that if a gift is reasonable, personal in nature and not in relation to your client’s business, your compliance department would approve it.

FINRA RULE 3220 (Influencing or Rewarding Employees of Others).

(a)  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. A gift of any kind is considered a gratuity.

(b)  This Rule shall not apply to contracts of employment with or to compensation for services rendered by persons enumerated in paragraph (a) provided that there is in existence prior to the time of employment or before the services are rendered, a written agreement between the member and the person who is to be employed to perform such services. Such agreement shall include the nature of the proposed employment, the amount of the proposed compensation, and the written consent of such person's employer or principal.

(c)  A separate record of all payments or gratuities in any amount known to the member, the employment agreement referred to in paragraph (b) and any employment compensation paid as a result thereof shall be retained by the member for the period specified by SEA Rule 17a-4.