Notice2026-03127
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Amend FINRA Rule 3220 (Influencing or Rewarding Employees of Others)
Primary source
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Published
February 18, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 32 (Wednesday, February 18, 2026)</title>
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[Federal Register Volume 91, Number 32 (Wednesday, February 18, 2026)]
[Notices]
[Pages 7570-7581]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03127]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104830; File No. SR-FINRA-2025-003]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving a Proposed Rule Change, as Modified by
Amendment No. 1, To Amend FINRA Rule 3220 (Influencing or Rewarding
Employees of Others)
February 12, 2026.
I. Introduction
On May 29, 2025, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 3220
(Influencing or Rewarding Employees of Others) (formerly NASD Rule
3060) (the ``Gifts Rule''). The proposed rule change, as modified by
Amendment No. 1 (hereinafter, the ``proposed rule change'' unless
otherwise specified), would, among other things, increase the gift
limit from $100 to $300 per person per year; provide FINRA authority to
grant exemptive relief from the Gifts Rule; and codify existing
guidance regarding, among other things, gifts incidental to business
entertainment, valuation of gifts, aggregation of gifts, personal
gifts, bereavement gifts, de minimis gifts and promotional or
commemorative items, donations due to federally declared major
disasters, and supervision and recordkeeping, as well as make
conforming changes to the gift limits in FINRA's non-cash compensation
rules.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 103226 (June 11, 2025), 90 FR
25674 (June 17, 2025) (File No. SR-FINRA-2025-003) (``Notice''); see
also Amendment No. 1, <a href="https://www.finra.org/sites/default/files/2025-09/FINRA-2025-003_Partial_A-1.pdf">https://www.finra.org/sites/default/files/2025-09/FINRA-2025-003_Partial_A-1.pdf</a>. Amendment No. 1 modified the
proposed rule change to increase the gift limit to $300 from $250,
as originally proposed in the Notice.
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The proposed rule change was published for comment in the Federal
Register on June 17, 2025.\4\ The public comment period closed on July
8, 2025. The Commission received comment letters in response to the
Notice.\5\ On July 14, 2025, FINRA consented to an extension of the
time period in which the Commission must approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to approve or disapprove the proposed rule change
to September 15, 2025.\6\ On September 11, 2025, FINRA responded to the
comment letters received in response to the Notice and filed an
amendment to modify the proposed rule as originally proposed in the
Notice (``Amendment No. 1'').\7\ On September 12, 2025, the Commission
published a notice of the filing of Amendment No. 1 and an order
instituting proceedings (``OIP'') to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.\8\
The Commission received additional comment letters in response to the
Notice and OIP.\9\ On December 2, 2025, FINRA responded to the comment
letters received in response to the Notice and OIP.\10\ On December 2,
2025, FINRA consented to extend until February 12, 2026, the time
period in
[[Page 7571]]
which the Commission must approve or disapprove the proposed rule
change.\11\ This order approves the proposed rule change.
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\4\ See Notice.
\5\ The comment letters are available at <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003.htm">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003.htm</a>.
\6\ See letter from April Collaku, Assistant General Counsel,
Office of General Counsel, FINRA (dated July 14, 2025), <a href="https://www.finra.org/sites/default/files/2025-07/sr-finra-2025-003-extension1.pdf">https://www.finra.org/sites/default/files/2025-07/sr-finra-2025-003-extension1.pdf</a>.
\7\ See letter from Ilana Reid, Associate General Counsel,
Office of General Counsel, FINRA (dated Sept. 11, 2025) (``FINRA
Letter 1''), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003.htm">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003.htm</a>.
\8\ Exchange Act Release No. 103958 (Sept. 12, 2025), 90 FR
44855 (Sep. 17, 2025) (File No. SR-FINRA-2025-003) (``Notice and
OIP'').
\9\ See supra note 5. One of these letters is a form letter,
which has been submitted multiple times in response to the Notice
and OIP (``Letter Type A'').
\10\ See letter from Ilana Reid, Associate General Counsel,
Office of General Counsel, FINRA (dated Dec. 2, 2025) (``FINRA
Letter 2''), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-681107-2097894.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-681107-2097894.pdf</a>.
\11\ See letter from Ilana Reid, Associate General Counsel,
Office of General Counsel, FINRA (dated Dec. 2, 2025), <a href="https://www.finra.org/sites/default/files/2025-12/FINRA-2025-003-extension-2.pdf">https://www.finra.org/sites/default/files/2025-12/FINRA-2025-003-extension-2.pdf</a>.
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II. Description of the Proposed Rule Change
In general, the Gifts Rule prohibits any broker-dealer that is a
member of FINRA (``member'') or person associated with a member
(``associated person''), 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.\12\ It also
requires members to maintain separate records of all payments made or
gratuities given in any amount known to the member pursuant to Exchange
Act Rule 17a-4.\13\ FINRA stated that the Gifts Rule is designed to
avoid improprieties, such as conflicts of interest, that may arise when
a member or associated person makes a gift to an employee of another
person, such as an institutional customer, vendor, or counterparty with
the hope of strengthening the business relationship with them.\14\
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\12\ FINRA Rule 3220(a).
\13\ FINRA Rule 3220(c).
\14\ Notice at 25674.
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FINRA has also published guidance regarding the application of the
Gifts Rule, including NASD Notice to Members 06-69,\15\ Frequently
Asked Questions,\16\ and an interpretive letter.\17\
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\15\ NASD Notice to Members 06-69 (Dec. 2006) (``NTM 06-69'').
\16\ Gifts/Business Entertainment/Non-Cash Compensation FAQs,
<a href="https://www.finra.org/rules-guidance/key-topics/gifts-gratuities-and-non-cash-compensation/faqs">https://www.finra.org/rules-guidance/key-topics/gifts-gratuities-and-non-cash-compensation/faqs</a> (``FAQs'').
\17\ Letter from Gary L. Goldsholle, Vice President & Associate
General Counsel, FINRA, to Amal Aly, Managing Director & Associate
General Counsel, SIFMA, dated December 17, 2007 (``Aly Letter''),
<a href="https://www.finra.org/rules-guidance/guidance/interpretive-letters/amal-aly-sifma-reasonable-and-customary-bereavement-gifts">https://www.finra.org/rules-guidance/guidance/interpretive-letters/amal-aly-sifma-reasonable-and-customary-bereavement-gifts</a>.
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As discussed in more detail below, FINRA's proposed rule change
would, among other things, increase the gift limit from $100 to $300
per person per year, provide FINRA exemptive authority regarding the
Gifts Rule, codify certain existing FINRA guidance pertaining to the
Gifts Rule, and make conforming changes to the gift limits in FINRA's
non-cash compensation rules.\18\
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\18\ See Notice at 25674. The non-cash compensation rules
prohibit members and their associated persons from directly or
indirectly accepting or making payments or offers of payments of any
non-cash compensation to any person in connection with the sale of
direct participation programs (see FINRA Rule 2310 (Direct
Participation Programs)), variable insurance contracts (see FINRA
Rule 2320 (Variable Contracts of an Insurance Company)), investment
company securities (see FINRA Rule 2341 (Investment Company
Securities)), and the public offerings of securities (see FINRA Rule
5110 (Corporate Financing Rule--Underwriting Terms and
Arrangements)). Id. at 25678.
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A. Increasing the Gift Limit From $100 to $300
FINRA stated that the current gift limit of $100 has been in place
since 1992.\19\ As originally proposed in the Notice, the proposed rule
change would have amended FINRA Rule 3220(a) to increase the current
gift limit to $250 to account for past, and ``some'' expected future,
inflation.\20\ As modified by Amendment No. 1, the proposed rule change
would increase the gift limit further from $250 to $300 to account for
expected future inflation for approximately ten years.\21\ FINRA stated
that the proposed rule change ``would continue to permit the exchange
of business courtesies while helping to guard against excessiveness.''
\22\ FINRA also stated that, if the proposed rule change is approved,
FINRA would review the gift limit periodically to determine if
additional modifications are needed to reflect changing economic
conditions.\23\
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\19\ Notice at 25675; FINRA Rule 3220(a); see also Exchange Act
Release No. 31662 (Dec. 28, 1992), 58 FR 370 (Jan. 5, 1993) (Order
Approving File No. SR-NASD-92-40) (increasing the gift limit from
$50 to $100).
\20\ See Notice at 25675.
\21\ See Amendment No. 1.
\22\ See Notice at 25675.
\23\ See id.; see also Amendment No. 1.
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B. Exemptive Relief
Proposed Rule 3220(d) would authorize FINRA to conditionally or
unconditionally grant an exemption from any provision of FINRA Rule
3220. Specifically, proposed Rule 3220(d) would state that FINRA staff
has authority to grant exemptions, pursuant to the FINRA Rule 9600
Series (Procedures for Exemption), from FINRA Rule 3220 ``for good
cause shown, after taking into account all relevant factors and
provided that such exemption is consistent with the purposes of the
Rule, the protection of investors, and the public interest.'' \24\
FINRA stated that because its members differ in size, structure,
business, and distribution models, it would be appropriate to have the
ability to provide relief from the Gifts Rule under specific factual
circumstances.\25\
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\24\ FINRA is also proposing to amend FINRA Rule 9610 to add the
Gifts Rule to the list of rules under which a member may seek
exemptive relief. Notice at 25675.
\25\ Id.
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C. Supplementary Material Consistent With Existing FINRA Guidance and
Interpretive Positions
FINRA staff has published guidance interpreting the Gifts Rule as
it applies to, among other things, certain gifts given during business
entertainment events; \26\ the valuation of certain gifts, including
tickets to sporting or other events; \27\ the aggregation of the value
of gifts given by a member and its associated persons to a particular
recipient over the course of a year; \28\ personal gifts (e.g., a
wedding gift or a congratulatory gift for the birth of a child); \29\
bereavement gifts (e.g., appropriate flowers or food platter for the
mourners); \30\ gifts of de minimis value (e.g., pens, notepads or
modest desk ornaments) and promotional items of nominal value that
display the firm's logo (e.g., umbrellas, tote bags or shirts); \31\
donations by a member or an associated person of a member to an
individual in connection with a federally declared major disaster; \32\
as well as guidance regarding a member's supervisory obligations.\33\
The proposed rule change would add Supplementary Material to FINRA Rule
3220 consistent with this guidance, as well as new material not covered
by existing guidance. Each supplemental rule section is described
below.
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\26\ See NTM 06-69 at n.3.
\27\ See id. at 3.
\28\ See id. at 2.
\29\ See id.
\30\ See Aly Letter.
\31\ See NTM 06-69 at 2.
\32\ See FAQs.
\33\ See NTM 06-69 at 3.
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1. Proposed Rule 3220.01 (Gifts Incidental to Business Entertainment)
Currently, there is no express exclusion from the restrictions of
FINRA Rule 3220 for gifts given during the course of a business
entertainment event.\34\ FINRA has provided guidance, however, stating
that gifts given during business entertainment may fall within the
exclusion for promotional items.\35\ Proposed Rule 3220.01 would
expressly state that a gift given during the course of a business
entertainment event would be subject to FINRA Rule 3220 unless it is
consistent with the requirements of proposed Rules 3220.04 and 3220.06.
In particular, under the proposed rule change, a gift given during the
course of a business entertainment event would be subject to the $300
limit on gifts in FINRA Rule 3220(a) unless it is a personal gift under
proposed Rule 3220.04 or of de minimis value or a
[[Page 7572]]
promotional or commemorative item under proposed Rule 3220.06.\36\
FINRA stated that for the purpose of this limit, the cost of the
business entertainment event itself would not be included in the value
of the gift.\37\
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\34\ Notice at 25675.
\35\ NTM 06-69 at n.3.
\36\ See Notice at 25675-25676.
\37\ Id. at 25676.
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2. Proposed Rule 3220.02 (Valuation of Gifts)
Current FINRA guidance states that a member should value gifts
(other than tickets for sporting or other events) at the higher of cost
or market value exclusive of tax and delivery charges.\38\ Proposed
Rule 3220.02 would codify a modified version of this guidance, stating
that gifts (other than tickets for sporting or other events) must be
valued at cost, exclusive of tax and delivery charges. FINRA stated
that requiring a member to value gifts at the higher of cost or market
value adds complexity and subjectivity because it is difficult and/or
burdensome for members and associated persons to determine the market
value of such gifts.\39\ Accordingly, FINRA determined not to codify
the requirement set forth in current guidance for a member to value
gifts (other than tickets for sporting or other events) at the higher
of cost or market value.\40\
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\38\ NTM 06-69 at 3.
\39\ See Notice at 25676.
\40\ See id.
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Current FINRA guidance also states that when valuing tickets for
sporting or other events, a member must use the higher of cost or face
value.\41\ Consistent with this guidance, proposed Rule 3220.02 would
require that when valuing tickets for sporting or other events a member
must use the higher of cost or face value. FINRA stated that it is
appropriate to distinguish tickets to sporting or other events from
other gifts because such tickets are commonly purchased on secondary
markets at a cost that is different from the face value and the face
value of such tickets are typically readily determinable.\42\
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\41\ NTM 06-69 at 3.
\42\ Notice at 25676.
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Additionally, current FINRA guidance states that if gifts are given
to multiple recipients, members should record the names of each
recipient and calculate and record the value of the gift on a pro rata,
per-recipient basis for purposes of complying with the gift limit.\43\
Proposed Rule 3220.02 would codify this guidance, stating that if gifts
are given to multiple recipients, members must record the names of each
recipient and calculate and record the value of the gift on a pro rata,
per-recipient basis for purposes of ensuring compliance with the $300
limit in proposed Rule 3220(a). FINRA stated that codifying this
guidance would improve transparency, awareness, and understanding of
how to apply the gift limit in situations where a gift is to be shared
among multiple recipients.\44\
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\43\ NTM 06-69 at 3.
\44\ Notice at 25676.
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3. Proposed Rule 3220.03 (Aggregation of Gifts)
Current FINRA guidance states that a member must aggregate all
gifts given by the member and its associated persons to a particular
recipient over the course of a year when assessing compliance with the
gift limit.\45\ Under the current guidance, each member also must state
in its procedures whether it is aggregating all gifts given by the
member and its associated persons on a calendar year, fiscal year, or
on a rolling basis beginning with the first gift to any particular
recipient.\46\ Consistent with this guidance, proposed Rule 3220.03
would require that members aggregate all gifts given by the member and
each associated person of the member to a particular recipient over the
course of the year for purposes of ensuring compliance with the gift
limit. Proposed Rule 3220.03 would also codify existing guidance and
require that each member state in its procedures whether it is
aggregating all gifts given by the member and its associated persons on
a calendar year, fiscal year, or on a rolling basis beginning with the
first gift to any particular recipient. Proposed Rule 3220.03 would
also state, however, that the aggregation requirements would not apply
to personal gifts under proposed Rule 3220.04 or to gifts of de minimis
value or promotional or commemorative items under proposed Rule 3220.06
as they are already not subject to the gift limit.\47\ FINRA stated
that the aggregation requirement would help ensure that persons who
give multiple gifts in a year to the same recipient do not circumvent
the gift limit.\48\
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\45\ Id. (citing NTM 06-69).
\46\ Id.
\47\ See id.
\48\ See id.
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4. Proposed Rule 3220.04 (Personal Gifts) \49\
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\49\ As originally proposed in the Notice, proposed Rule 3220.04
(Personal Gifts) would have treated a bereavement gift (e.g.,
appropriate flowers or food platter for the mourners) sent on behalf
of a member or its associated persons to acknowledge the death of an
employee of a client, or a member of such employee's immediate
family, as a personal gift. As modified by Amendment No. 1,
bereavement gifts would be separately governed under proposed Rule
3220.05 (Bereavement Gifts), described more fully below.
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Current FINRA guidance states that the prohibitions in the Gifts
Rule generally do not apply to personal gifts (e.g., a wedding gift or
a congratulatory gift for the birth of a child), provided that these
gifts are not ``in relation to the business of the employer of the
recipient.'' \50\ Current FINRA guidance also provides several factors
members should consider in determining whether a gift is ``in relation
to the business of the employer of the recipient,'' including the
nature of any pre-existing personal or family relationship between the
person giving the gift and the recipient, and whether the associated
person paid for the gift.\51\ Under current FINRA guidance, FINRA
presumes that a gift for which a member bears the cost (either directly
or by reimbursing an employee) is in relation to the business of the
employer of the recipient and therefore subject to the gift limit.\52\
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\50\ NTM 06-69 at 2.
\51\ Id.
\52\ Id.
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Proposed Rule 3220.04 would codify obligations consistent with this
guidance. First, proposed Rule 3220.04 would state that gifts that are
given for infrequent life events (e.g., a wedding gift or a
congratulatory gift for the birth of a child) are not subject to the
gift limit restrictions in FINRA Rule 3220(a) or the recordkeeping
requirements in FINRA Rule 3220(c), provided the gifts are customary
and reasonable, personal in nature, and not in relation to the business
of the employer of the recipient. Second, proposed Rule 3220.04 would
state that in determining whether a gift is ``personal in nature and
not in relation to the business of the employer of the recipient,''
members should consider a number of factors, including the nature of
any pre-existing personal or family relationship between the person
giving the gift and the recipient and whether the associated person
paid for the gift. Third, proposed Rule 3220.04 would state that when a
member bears the cost of a gift, either directly or by reimbursing an
associated person, FINRA will presume the gift is not personal in
nature and instead is in relation to the business of the employer of
the recipient.
FINRA stated that gifts for infrequent life events do not typically
create the types of improper incentives that the Gifts Rule seeks to
avoid.\53\ FINRA also stated that the proposed rule change should help
minimize the unnecessary burdens associated with applying the
recordkeeping obligations to such gifts.\54\
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\53\ Notice at 25677.
\54\ Id. at 25679.
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[[Page 7573]]
5. Proposed Rule 3220.05 (Bereavement Gifts) \55\
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\55\ Amendment No. 1 added proposed Rule 3220.05 to
differentiate bereavement gifts from personal gifts, resulting in
renumbering of the supplementary materials as originally proposed in
the Notice. See supra note 49.
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Current FINRA guidance states that reasonable and customary
bereavement gifts (e.g., appropriate flowers or food platter for the
mourners) sent on behalf of a member or its associated persons to
acknowledge the death of an employee of a client, or a member of such
employee's immediate family, are not considered to be ``in relation to
the business of the employer of the recipient.'' \56\ Consistent with
this guidance, proposed Rule 3220.05 would state that bereavement gifts
that are customary and reasonable are not considered to be in relation
to the business of the employer of the recipient and, therefore, are
not subject to the gift limit restrictions in FINRA Rule 3220(a) or the
recordkeeping requirements in FINRA Rule 3220(c). FINRA stated that
gifts for infrequent life events to acknowledge the death of an
employee of a client, or a member of such employee's immediate family,
do not typically create the types of improper incentives that the Gifts
Rule seeks to avoid.\57\ FINRA also stated that the proposed rule
change should help minimize unnecessary burdens associated with
applying the recordkeeping obligations to such gifts.\58\
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\56\ See Aly Letter.
\57\ Notice at 25677.
\58\ Id. at 25679.
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6. Proposed Rule 3220.06 (De minimis Gifts and Promotional or
Commemorative Items)
a. De Minimis Gifts and Promotional Items
Current FINRA guidance states that FINRA Rule 3220 does not apply
to gifts of de minimis value (e.g., pens, notepads or modest desk
ornaments) or to promotional items of nominal value that display the
firm's logo (e.g., umbrellas, tote bags or shirts).\59\ This guidance
also states that in order for a promotional item to fall within this
exclusion, its value must be ``substantially below'' the current $100
gift limit.\60\ Consistent with this guidance and recognizing proposed
Rule 3220(a)'s increase to the gift limit, proposed Rule 3220.06 would
state that gifts of a de minimis value (e.g., pens, notepads, or modest
desk ornaments) or promotional items of nominal value that display the
member's logo (e.g., umbrellas, tote bags, or shirts) are not subject
to the gift limit restrictions in FINRA Rule 3220(a) or the
recordkeeping requirements in FINRA Rule 3220(c), provided that the
value of the gift or promotional item is ``substantially below'' the
$300 limit. FINRA stated that the proposed rule change should help
minimize unnecessary burdens associated with applying the recordkeeping
obligations to such gifts.\61\
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\59\ NTM 06-69 at 2.
\60\ Id.
\61\ Notice at 25679.
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b. Commemorative Items
Current FINRA guidance states that, in general, neither the
prohibition in FINRA Rule 3220(a) nor the recordkeeping requirements in
FINRA Rule 3220(c) applies to customary Lucite tombstones, plaques or
other similar solely decorative items commemorating a business
transaction, even when such items have a cost of more than $100.\62\
Consistent with this guidance, proposed Rule 3220.06(b) would state
that customary and reasonable solely decorative items commemorating a
business transaction are not subject to the gift limit restrictions in
FINRA Rule 3220(a) or the recordkeeping requirements in FINRA Rule
3220(c). FINRA stated that the proposed rule change would not
explicitly limit the value of customary commemorative items because
they must be solely decorative. Therefore, where an item is not solely
decorative, it would be subject to the restrictions in the Gifts
Rule.\63\ FINRA also stated that the proposed rule change should help
minimize unnecessary burdens associated with applying the recordkeeping
obligations to such gifts.\64\
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\62\ NTM 06-69 at 2.
\63\ See Notice at 25677.
\64\ See id. at 25679.
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7. Proposed Rule 3220.07 (Donations Due to Federally Declared Major
Disasters)
Current FINRA guidance states that it does not consider donations
by a member or an associated person of a member to an employee of an
institutional customer to provide assistance to the individual in
connection with a federally declared major disaster to be ``in relation
to the business of the employer of the recipient'' for purposes of
FINRA Rule 3220(a).\65\ Consistent with this guidance, proposed Rule
3220.07 would state that donations by a member or an associated person
to any person, principal, proprietor, employee, agent, or
representative of another person to provide assistance to the
individual for losses sustained in a natural event that the President
has declared to be a major disaster, such as a wildfire, hurricane,
tornado, earthquake, or flood, are not considered ``in relation to the
business of the employer of the recipient'' for purposes of FINRA Rule
3220(a). Proposed Rule 3220.07 would also state that such donations are
not subject to the gift limit restrictions in FINRA Rule 3220(a) or the
recordkeeping requirements of FINRA Rule 3220(c). FINRA stated that
such donations would not be considered to be ``in relation to the
business of the employer of the recipient'' because the nature of such
disasters are unpredictable and catastrophic.\66\ FINRA also stated
that the proposed rule change should help minimize unnecessary burdens
associated with applying the recordkeeping obligations to such
gifts.\67\
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\65\ FAQs.
\66\ Notice at 25677.
\67\ Id. at 25679.
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8. Proposed Rule 3220.08 (Supervision and Recordkeeping)
FINRA Rule 3220(c) requires among other things, that members retain
a separate record of all payments or gratuities in any amount known to
the member for the period specified by Exchange Act Rule 17a-4.\68\
Current FINRA guidance also states that FINRA Rule 3110 (formerly NASD
Rule 3010) requires a member to have a supervisory system reasonably
designed to achieve compliance with the Gifts Rule.\69\ Current FINRA
guidance further states that in order to meet the requirements of FINRA
Rules 3220(c) and 3110, members are required to have systems and
procedures reasonably designed to ensure that gifts in relation to the
business of the employer of the recipient given by the member and its
associated persons to employees of clients of the member are: (1)
reported to the member, (2) reviewed for compliance with the Gifts
Rule, including aggregation, and (3) maintained in the member's
records.\70\ Such procedures should include provisions reasonably
designed to ensure that an associated person who is making a gift is
not responsible for determining whether such gift is personal rather
than in relation to the
[[Page 7574]]
business of the recipient's employer.\71\ Current FINRA guidance also
states that items of de minimis value or nominal promotional or
commemorative items are not subject to the Gifts Rule's record-keeping
requirements.\72\
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\68\ See NTM 06-69 at 3 (reminding members that the FINRA Gifts
Rule requires ``separate recordkeeping'' of gifts and gratuities).
\69\ See id.
\70\ See id.
\71\ See id.
\72\ See id.
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Consistent with this guidance, proposed Rule 3220.08 would state
that FINRA Rule 3110 requires a member to have a supervisory system
reasonably designed to achieve compliance with FINRA Rule 3220.
Proposed Rule 3220.08 would further state that to meet these standards,
members would be required to have systems and procedures reasonably
designed to ensure that payments and gratuities in relation to the
business of the employer of the recipient given by the member and its
associated persons to employees of another person would be: (1)
reported to the member; (2) reviewed for compliance with FINRA Rule
3220; and (3) maintained in the member's records. In addition, proposed
FINRA Rule 3220.08 would require that such procedures be reasonably
designed to ensure that an associated person who is giving a payment or
gratuity is not responsible for determining whether such payment or
gratuity is in relation to the business of the recipient's
employer.\73\ FINRA stated that requiring a person other than the
associated person giving the gift to assess the nature of the gift
would encourage objectivity in making such determinations.\74\
Consistent with existing guidance, proposed Rule 3220.08 would further
state that members would not be required to maintain records of gifts
that are excluded from the restrictions of the Gifts Rule pursuant to
proposed FINRA Rules 3220.04 through 3220.07.
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\73\ See id.
\74\ See Notice at 25678.
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9. Proposed FINRA Rule 3220.09 (Gifts to a Member's Associated Persons
or Individual Retail Customers)
The proposed rule change would add new Rule 3220.09, stating that
FINRA Rule 3220 would not apply to gifts from a member to its own
associated persons, or to gifts from a member or an associated person
to individual retail customers. FINRA stated that new proposed Rule
3220.09 would clarify, and improve awareness and understanding of, the
scope of the Gifts Rule.\75\
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\75\ See id.
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D. Proposed Conforming Changes to the Non-Cash Compensation Rules
The proposed rule change would make conforming changes to the gift
limits in FINRA Rule 2310 (Direct Participation Programs), FINRA Rule
2320 (Variable Contracts of an Insurance Company), FINRA Rule 2341
(Investment Company Securities), and FINRA Rule 5110 (Corporate
Financing Rule--Underwriting Terms and Arrangements) (collectively, the
``Non-Cash Compensation Rules'').\76\ FINRA stated that the Non-Cash
Compensation Rules prohibit members and their associated persons from
directly or indirectly accepting or making payments or offers of
payments of any non-cash compensation to any person in connection with
the sale of direct participation programs,\77\ variable insurance
contracts,\78\ investment company securities,\79\ and the public
offerings of securities.\80\ The Non-Cash Compensation Rules include
exceptions from this prohibition for gifts that do not exceed $100 per
individual per year and are not preconditioned on the achievement of a
sales target.\81\ Consistent with the proposed change to the gift limit
in FINRA Rule 3220(a), the proposed rule change would raise the dollar
limits in the Non-Cash Compensation Rules from $100 to $300.\82\
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\76\ See id.
\77\ See FINRA Rule 2310(c) (Direct Participation Programs).
\78\ See FINRA Rule 2320(g)(4) (Variable Contracts of an
Insurance Company).
\79\ See FINRA Rule 2341(l)(5) (Investment Company Securities).
\80\ See FINRA Rule 5110(f) (Corporate Financing Rule--
Underwriting Terms and Arrangements); Notice at 25678.
\81\ See FINRA Rules 2310(c)(2)(A); 2320(g)(4)(A);
2341(l)(5)(A); 5110(f)(2)(A).
\82\ Notice at 25678; Amendment No.1; see proposed Rules
2310(c)(2)(A); 2320(g)(4)(A); 2341(l)(5)(A); 5110(f)(2)(A).
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III. Discussion and Commission Findings
After careful review of the proposed rule change, the comment
letters, and FINRA's responses to the comments, the Commission finds
that the proposed rule change is consistent with the requirements of
the Exchange Act and the rules and regulations thereunder that are
applicable to a national securities association.\83\ Specifically, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Exchange Act, which requires, among other
things, that FINRA rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.\84\
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\83\ In approving this rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\84\ 15 U.S.C. 78o-3(b)(6).
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The proposed rule change is reasonably designed to focus member
compliance on the types of gifts that FINRA believes are more likely to
be associated with the improprieties and improper incentives that the
Gifts Rule is designed to address. In particular, increasing the gift
limit from $100 to $300 reasonably reflects changes to purchasing power
due to inflation since the gift limit was last raised in 1992, as well
as approximately ten years of expected future inflation to reduce the
frequency of future upward adjustments. In addition, codifying and
clarifying guidance that provides member firms with clear and objective
methods regarding the valuation, attribution, and aggregation of gifts,
as well as the treatment of, among other things, personal gifts,
bereavement gifts, de minimis gifts and promotional items,
commemorative items, and donations associated with federally declared
major disasters, should facilitate compliance and clarify regulatory
expectations regarding the Gifts Rule.
Moreover, by codifying the obligation for members to maintain a
supervisory system reasonably designed to achieve compliance with FINRA
Rule 3220, the proposed rule change clarifies regulatory expectations,
and reasonably imposes on member firms the obligation to oversee their
compliance with the Gifts Rule, while allowing for supervisory
flexibility appropriate to firms of different sizes and business
models. In particular, requiring that a firm's procedures be reasonably
designed to ensure that an associated person giving a gift is not
responsible for determining whether a gift is in relation to the
business of the recipient's employer, the proposed rule change would
promote visibility for the firm and oversight of its associated
persons' activities, and help foster objectivity in the evaluation of
whether certain gifts are subject to the restrictions in the Gifts
Rule. Accordingly, and as explained in more detail below, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Exchange Act. The Commission addresses the
proposed rule change's specific provisions, and any related comments,
in turn.
[[Page 7575]]
A. Increasing the Gift Limit from $100 to $300
As stated above, the current gift limit of $100 has been in place
since 1992 (the last time FINRA raised the gift limit).\85\ As
originally proposed in the Notice, the proposed rule change would have
raised the gift limit from $100 to $250 to account for past, and some
expected future, inflation.\86\
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\85\ See supra note 19.
\86\ Notice at 25675.
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Commenters generally supported the proposed rule change.\87\
Specifically, commenters stated that the increase to the gift limit
would more accurately reflect inflation and current business
practices.\88\ Some supportive commenters, however, requested that
FINRA raise the gift limit further.\89\ Two commenters recommended that
FINRA raise the gift limit to $500,\90\ while another commenter
recommended raising it to $300.\91\ These commenters stated that
further increasing the gift limit would more appropriately reflect the
impact of future inflation.\92\
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\87\ Letters from Patricia Reinard-Kopsa, Chief Compliance
Officer, Trubee Wealth Advisors, at 1 (dated July 3, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-619927-1819774.html">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-619927-1819774.html</a> (``Trubee Letter''); Jessica R. Giroux, Chief Legal
Officer, American Securities Association, at 1 (July 8, 2025),
<a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-621567-1825174.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-621567-1825174.pdf</a> (``ASA Letter''); Michael Decker, Senior Vice
President of Research and Public Policy, Bond Dealers of America, at
1 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-621928-1825556.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-621928-1825556.pdf</a>, (``BDA Letter''); David T.
Bellaire, Esq., Executive Vice President & General Counsel,
Financial Services Institute, at 1 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622028-1825654.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622028-1825654.pdf</a> (``FSI Letter''); Clifford Kirsch and Eric Arnold,
Eversheds Sutherland (US) LLP for the Committee of Annuity Insurers,
at 2 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622347-1825994.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622347-1825994.pdf</a> (``CAI Letter 1'');
Bernard V. Canepa, Managing Director and Associate General Counsel,
SIFMA, at 1 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622087-1825716.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-622087-1825716.pdf</a> (``SIFMA Letter
1''); Tara Buckley, Deputy General Counsel, Investment Company
Institute, at 2 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-624587-1839775.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-624587-1839775.pdf</a> (``ICI
Letter''); Matt Billings, President, Robinhood Financial LLC and
Robinhood Securities, LLC, at 1 (dated July 8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-623867-1837254.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-623867-1837254.pdf</a> (``Robinhood Letter'').
\88\ See ASA Letter at 1 (stating that increasing the gift limit
is ``a long overdue update that reflects inflation and current
business realities, while maintaining appropriate safeguards to
prevent conflicts of interest and excessive inducements''); Trubee
Letter at 1 (stating that adjusting for inflation aligns the rule
with today's business environment and the reasonable costs of
business courtesies); BDA Letter at 1 (stating that this increase is
sensible and necessary, reflects decades of inflation, and aligns
the rule more closely with actual business practices).
\89\ Robinhood Letter; FSI Letter; CAI Letter 1.
\90\ Robinhood Letter; FSI Letter.
\91\ CAI Letter 1.
\92\ Robinhood Letter at 1 (stating that ``a higher limit is
necessary to take into account future inflation and the likelihood
that the new limit will remain in place for many years''); FSI
Letter (stating that a higher threshold for the gift limit would
mitigate cost-of-living inequities and account for difference in
purchasing power across parts of the country); CAI letter 1 (stating
that ``[a]n increase of the gift limit to $300 would provide for
future inflation through 2035'').
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In response, FINRA amended the proposed rule change to increase the
gift limit to $300.\93\ While the $250 gift limit would have accounted
for past, and ``some'' expected future, inflation, FINRA proposed
raising the gift limit to $300 to account for potential future
inflation for approximately ten years (based on the average rate of
inflation since 1992).\94\ FINRA stated that such an increase would
``account for future inflation as well as cost-of-living inequities and
differences in purchasing power across parts of the country'' \95\ and
reduce the frequency of future upward adjustments.\96\ FINRA further
stated, however, that it would periodically review the gift limit to
determine if further increases are warranted.\97\
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\93\ See Amendment No. 1; see also FINRA Letter 1.
\94\ FINRA Letter 1 at 3.
\95\ Id. at 2-3.
\96\ Id. at 3.
\97\ Id.
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Commenters also generally supported the proposed rule change, as
modified by Amendment No. 1.\98\ Several of these commenters stated
that raising the annual gift limit from $100 to $300 would adjust for
inflation while also ensuring proper investor protections.\99\ Another
commenter, however, requested that FINRA further raise the gift limit
to $500.\100\
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\98\ Clifford Kirsch and Eric Arnold, Eversheds Sutherland (US)
LLP for the Committee of Annuity Insurers, at 2 (dated Oct. 8,
2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-667807-2004514.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-667807-2004514.pdf</a> (``CAI Letter 2'') (stating that
FINRA's decision to raise the gift limit to $300 will provide for
future inflation through 2035); Bernard V. Canepa, Managing Director
and Associate General Counsel, SIFMA, at 1 (dated Oct. 8, 2025),
<a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-667967-2004694.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-667967-2004694.pdf</a> (``SIFMA Letter 2''); Letter Type A, <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-typea.htm">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-typea.htm</a>.
\99\ See Letter Type A; see also CAI Letter 2 at 2.
\100\ Jeanine Blackman, CCO, Reagan Securities, at 1 (dated Oct.
8, 2025), <a href="https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-668047-2005435.pdf">https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003-668047-2005435.pdf</a> (``Reagan Letter'').
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In response, FINRA stated that it previously considered commenters'
suggestion to raise the gift limit to $500 \101\ and continues to
believe that a $300 gift limit is appropriate for the reasons expressed
in its first response letter.\102\ Specifically, a $300 gift limit
should account for approximately 10 years of future inflation, thereby
reducing the frequency of future upward adjustments.\103\ FINRA further
stated, however, that it would periodically review the gift limit to
determine if further increases are warranted.\104\ For these reasons,
FINRA has determined not to propose further changes to the gift limit
at this time.\105\
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\101\ See supra note 90 and accompanying text.
\102\ See FINRA Letter 2 at 3.
\103\ See FINRA Letter 1 at 3; FINRA Letter 2 at 3.
\104\ FINRA Letter 1 at 3; FINRA Letter 2 at 3.
\105\ FINRA Letter 1 at 3; FINRA Letter 2 at 3.
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Several commenters recommended that FINRA establish a process to
encourage a more frequent reevaluation of the gift limit in order to
account for inflation.\106\ One of these commenters suggested that
FINRA amend the proposed rule change to require a formal recalculation
of the gift limit on a periodic basis based on the annual rate of
inflation as calculated by the Consumer Price Index (or some similar
metric).\107\ Similarly, a commenter recommended that FINRA amend the
proposed rule change to establish a ``self-executing'' formula that
would adjust the gift limit on an ongoing basis.\108\ Alternatively,
commenters recommended that FINRA commit to periodically reconsider the
gift limit after a specified time period.\109\
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\106\ See CAI Letter 1 at 2; ASA Letter at 2; FSI Letter at 3;
ICI Letter at 2; SIFMA Letter 1 at 1.
\107\ CAI Letter 1 at 2 (stating that this approach would align
the gift limit with economic conditions on a regular basis without
FINRA having to expend time and resources amending the rule).
\108\ ICI Letter at 2.
\109\ See id. at 2 (recommending that in lieu of establishing a
self-executing formula FINRA amend the proposed rule change to
require it to revisit the gift limit no less frequently than every
five years); SIFMA Letter 1 at 1 (recommending that FINRA
periodically review the gift limit every five years); FSI Letter at
3 (recommending that FINRA mandate a review cycle every three
years); ASA Letter at 2 (recommending that FINRA periodically review
the gift limit to ensure it remains appropriate in light of future
inflation and evolving business practices).
---------------------------------------------------------------------------
In response, FINRA stated that in determining the proposed $300
gift limit, it considered the average annual rate of inflation since
1992 (the last time it raised the gift limit to $100) and concluded
that the proposed $300 gift limit should account for future inflation
for approximately 10 years.\110\ FINRA stated that the proposed
increase should therefore reduce the frequency of future upward
adjustments.\111\ As such, FINRA stated that it believes that there is
no need to commit to a specific amount of time to periodically review
the gift limit at this time.\112\ Nevertheless, FINRA
[[Page 7576]]
also stated that it intends to periodically review the gift limit to
determine if further increases are warranted.\113\ For these reasons,
FINRA declined to further amend the proposed rule change.
---------------------------------------------------------------------------
\110\ FINRA Letter 1 at 3.
\111\ Id.
\112\ Id.
\113\ Id.; see also Notice at 25675.
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The proposed rule change increasing the gift limit from $100 to
$300 is reasonably designed to account for inflation since 1992 (when
the gift limit was last adjusted) as well as potential future inflation
for the next ten years. Raising the gift limit to $300 more accurately
reflects current and anticipated economic conditions while maintaining
the fundamental limitations to minimize potential improprieties, such
as conflicts of interest, that FINRA believes may arise when a member
or an associated person makes a gift to an employee of another person.
FINRA intends to periodically review the gift limit to determine if
further increases are warranted, which should help ensure that the gift
limit reflects future economic conditions. For these reasons, the
proposed rule change is reasonably designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
B. Exemptive Relief
As stated above, proposed FINRA Rule 3220(d) would authorize FINRA
to conditionally or unconditionally grant an exemption from any
provision of FINRA Rule 3220. Specifically, proposed Rule 3220(d) would
state that FINRA staff may grant exemptions, pursuant to the FINRA Rule
9600 Series,\114\ from FINRA Rule 3220 ``for good cause shown after
taking into consideration all relevant factors . . . to the extent that
such exemption is consistent with the purpose of the Rule, the
protection of investors, and the public interest.'' \115\ Commenters
generally supported this proposed rule change,\116\ with one
recommending that FINRA issue guidance to assist members in assessing
when a potential request may be appropriate.\117\
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\114\ Pursuant to FINRA Rule 9610, a member seeking exemptive
relief must file an application with FINRA containing the member's
name and address, the name of a person associated with the member
who will serve as the primary contact for the application, the rule
from which the member is seeking an exemption, and a detailed
statement of the grounds for granting the exemption.
\115\ Proposed Rule 3220(d).
\116\ Trubee Letter at 1; CAI Letter 1 at 2; ASA Letter at 1
(stating that a process for exemptive relief provides needed
flexibility and recognizes the diversity of firm sizes, business
models, and circumstances in the industry).
\117\ CAI Letter 1 at 2 (stating that such guidance could save
members time and resources by avoiding unnecessary requests).
---------------------------------------------------------------------------
In response, FINRA stated that it is premature to provide further
guidance regarding when a potential exemptive request may be
appropriate because the proposed rule change has not been approved.
However, FINRA stated that if the proposed rule change is approved, it
welcomes future discussion on this topic.\118\
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\118\ FINRA Letter 1 at 7.
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The proposed rule change authorizing FINRA to grant exemptive
relief from any provision of the Gifts Rule is reasonably designed to
provide FINRA with flexibility to address issues that may arise under
the Gifts Rule, taking into account specific factual circumstances, and
in light of differences among members, including their size and
business models. In addition, FINRA has committed to further discussion
of the potential application of this rule change after the rule has
been approved. For these reasons, the proposed rule change is
reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
C. Supplementary Material
As stated above, the proposed rule change would add Supplementary
Material to FINRA Rule 3220 consistent with current FINRA staff
guidance related to the Gifts Rule, as well as new material not covered
by existing guidance. The Commission discusses each individual
Supplementary Material and comments and responses in turn below.
1. Proposed Rule 3220.01 (Gifts Incidental to Business Entertainment)
As stated above, proposed Rule 3220.01 would clarify that gifts
given during the course of a business entertainment event would be
subject to the Gifts Rule unless it is a personal gift under proposed
Rule 3220.04 (Personal Gifts) or of de minimis value or a promotional
or commemorative item under proposed Rule 3220.06 (De Minimis Gifts and
Promotional or Commemorative Items).
In addition to generally supporting the proposed rule change, a
commenter recommended that after the proposed rule change has been
approved, FINRA provide ``clear and formal clarification regarding the
treatment of business entertainment under the rule.'' \119\ The
commenter stated that additional regulatory clarity would reduce
ambiguity and support more consistent and cost-effective
compliance.\120\ Several commenters also recommended that FINRA
harmonize its treatment of gifts across regulatory regimes.\121\
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\119\ BDA Letter at 1-2 (recommending FINRA provide clear,
formal guidance confirming that reasonable entertainment falls
outside the annual limit).
\120\ Id. at 1.
\121\ See ASA Letter at 2; BDA Letter at 1-2 (stating that
``[f]or the sake of regulatory coherence, FINRA and [Municipal
Securities Rulemaking Board (MSRB)] rules should align as closely as
possible''); SIFMA Letter 1 at 2 (recommending that FINRA work with
the MSRB and the exchanges to identify additional areas where gift
requirements could be harmonized).
---------------------------------------------------------------------------
In response, FINRA stated that other than increasing the dollar
limit for gifts given during a business entertainment event, the
treatment of such events themselves is outside the scope of the
proposed rule change, and noted that the current guidance on business
entertainment continues to apply.\122\ Moreover, FINRA stated that it
is premature to provide further guidance or make additional changes
prior to Commission approval of the proposed rule change.\123\ Finally,
FINRA stated that it appreciated comments regarding regulatory
harmonization and will take them under advisement.\124\ As such, FINRA
declined to further amend the proposed rule change at this time but
welcomed future discussion on these topics, including on whether
additional guidance may be warranted.\125\
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\122\ See FINRA Letter 1 at 8, n.19. Similarly, another
commenter requested guidance regarding whether training and
education expenses are permitted under the Gifts Rule. ICI Letter at
3. FINRA stated that commenter's request related to FINRA's non-cash
compensation rules, which are generally outside the scope of the
proposed rule change. See FINRA Letter 1 at 8, n.19 (noting that the
current rules on non-cash compensation continue to apply).
\123\ FINRA Letter 1 at 8.
\124\ Id. at 7, n. 18.
\125\ Id. at 7-8.
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Proposed Rule 3220.01 is reasonably designed to clarify the
application of the Gifts Rule to certain gifts given during the course
of business entertainment events. Current FINRA guidance states that
there is no FINRA rule that expressly excludes gifts given during the
course of business entertainment and conferences from the restrictions
of the Gifts Rule. As such, gifts given during a business entertainment
event should be treated like any other gift subject to FINRA Rule 3220.
Specifically, such a gift would be subject to the restrictions of the
Gifts Rule unless it is a personal gift under proposed Rule 3220.04 or
of de minimis
[[Page 7577]]
value or a promotional or commemorative item under proposed Rule
3220.06. By clarifying the application of the Gifts Rule, the proposed
rule change would facilitate compliance and provide regulatory
certainty to members that provide gifts in the course of business
entertainment events. In addition, while comments regarding further
regulatory harmonization are out of scope of the proposed rule change,
FINRA has indicated both that it will take those comments under
advisement and its openness to future discussion regarding the need for
additional guidance. For these reasons, the proposed rule change is
reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
2. Proposed Rule 3220.02 (Valuation of Gifts)
As stated above, proposed Rule 3220.02 would, consistent with
current FINRA guidance, require members to value tickets for sporting
or other events at the higher of cost or face value. In addition, it
would require members to value all other gifts at cost (rather than at
the higher of cost or market value as is the case under current FINRA
guidance), exclusive of tax and delivery charges. If a gift is given to
multiple recipients, proposed Rule 3220.02 would require members to
record the names of each recipient and calculate and record the value
of the gift on a pro rata, per-recipient basis for purposes of ensuring
compliance with the $300 gift limit.
Commenters supported the proposed rule change.\126\
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\126\ LeGaye Letter at 1 (supporting FINRA's ``clear, practical
guidance regarding valuation''); ASA Letter at 2 (stating that
allowing members to value most gifts at cost (exclusive of tax and
delivery), rather than the higher cost or market value, will reduce
subjectivity and compliance costs).
---------------------------------------------------------------------------
The proposed rule change is reasonably designed to provide members
with clear and objective methods to value gifts under the Gifts Rule.
Current FINRA guidance advises members to value gifts (other than
tickets for sporting or other events) at the higher of cost or market
value exclusive of tax and delivery charges. However, determining a
gift's market value can be difficult and could introduce complexity and
subjectivity to the valuation process, thus creating compliance
uncertainty. Requiring members to value certain gifts at cost is a
clearer and more objective method to achieve the purposes of the Gifts
Rule while minimizing unnecessary compliance burdens. It is also
appropriate for FINRA to distinguish tickets to sporting or other
events from other gifts, because such tickets are commonly purchased on
secondary markets at a cost that is different from the face value and
the face value of such tickets is typically readily determinable.
Finally, requiring members to record the names of each recipient of a
gift given to multiple recipients and calculate and record the value of
such gift on a pro rata, per-recipient basis should help clarify
regulatory expectations and facilitate regulatory oversight of
compliance with the proposed rule. For these reasons, the proposed rule
change is reasonably designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
and, in general, to protect investors and the public interest.
3. Proposed Rule 3220.03 (Aggregation of Gifts)
As stated above, the proposed rule change would require a member to
aggregate all gifts given by the member and each associated person of
the member to a particular recipient over the course of the year for
purposes of ensuring compliance with the $300 gift limit in proposed
Rule 3220(a). Proposed Rule 3220.03 would also require that each member
state in its procedures whether it is aggregating all gifts given by
the member and its associated persons on a calendar year, fiscal year,
or on a rolling basis beginning with the first gift to any particular
recipient. The aggregation requirement would not, however, apply to
personal gifts under proposed Rule 3220.04 or to gifts of de minimis
value or promotional or commemorative items under proposed Rule
3220.06.
Two commenters supported proposed Rule 3220.03.\127\ One of the two
stated that the aggregation requirement is appropriately tailored to
the rule's purpose and provides clear direction for members.\128\ The
other commenter commended FINRA for codifying clear practical guidance
regarding aggregation.\129\
---------------------------------------------------------------------------
\127\ See ASA Letter at 2; LeGaye Letter at 1.
\128\ ASA Letter at 2.
\129\ LeGaye Letter at 1.
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The proposed aggregation requirement is reasonably designed to help
avoid circumvention of the $300 annual gifts limit by giving multiple
gifts below the threshold in a year to the same recipient. The proposed
rule also reasonably excludes from the aggregation requirement personal
gifts, as well as gifts of de minimis value or promotional or
commemorative items, since such gifts would be excluded from the gifts
limit under proposed Rules 3220.04 and 3220.06. In addition, by
allowing three aggregation methods, whether on a calendar year, fiscal
year, or on a rolling basis, the proposed aggregation requirement
provides flexibility for members to choose a method that best reflects
their business operations. Finally, codifying existing guidance
requiring members to address in their procedures how they intend to
aggregate the gifts given by them and their associated persons should
facilitate regulatory oversight. For these reasons, the proposed rule
change is reasonably designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
and, in general, to protect investors and the public interest.
4. Proposed Rule 3220.04 (Personal Gifts)
As stated above, the proposed rule change would exclude gifts that
are given for infrequent life events (e.g., a wedding gift or a
congratulatory gift for the birth of a child) from the gift limit
restrictions in FINRA Rule 3220(a) and recordkeeping requirements in
FINRA Rule 3220(c), provided such gifts are customary and reasonable,
personal in nature, and not in relation to the business of the employer
of the recipient. In determining whether a gift is ``personal in nature
and not in relation to the business of the employer of the recipient,''
proposed Rule 3220.04 states that members should consider a number of
factors, including the nature of any pre-existing personal or family
relationship between the person giving the gift and the recipient and
whether the associated person paid for the gift.\130\ However, under
the proposed rule change, FINRA would presume that any gift for which a
member bears the cost, either directly or by reimbursing an associated
person, to be not personal in nature and instead in relation to the
business of the employer of the recipient.\131\
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\130\ In addition, proposed Rule 3220.08 would require that a
member's supervisory system for compliance with Rule 3220 be
reasonably designed to ensure that an associated person who is
giving a payment or gratuity is not responsible for determining
whether such payment or gratuity is in relation to the business of
the recipient's employer.
\131\ Proposed Rule 3220.08.
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Commenters expressed support for proposed Rule 3220.04, stating
that it will help reduce ambiguity around what constitutes a personal
gift \132\ and help members implement more effective compliance
programs.\133\ Other
[[Page 7578]]
commenters requested that FINRA amend the personal gift exception under
Supplementary Material 3220.04.\134\ One of these commenters
recommended that FINRA amend the proposed rule change or provide
guidance to clarify that a personal gift would not lose its exempt
status solely because a member reimburses the associated person for the
gift, provided the member: (1) has reasonable controls to confirm that
the gift is personal and not related to the recipient's business
duties; and (2) treats the reimbursement, for accounting purposes, as a
personal or registered representative gift expense, rather than a
client entertainment or marketing expense.\135\ Another commenter
suggested the Commission approve the proposed rule change but that
FINRA revisit, at a future time, the limitations on personal gifts
given on a more frequent basis (e.g., birthday or holiday gifts) that
are paid for by an associated person.\136\
---------------------------------------------------------------------------
\132\ See Trubee Letter at 1.
\133\ See ASA Letter at 2.
\134\ LeGaye Letter at 2; SIFMA Letter 1 at 2.
\135\ LeGaye Letter at 2.
\136\ SIFMA Letter 1 at 3.
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In response, FINRA stated that the personal gift exclusion is
designed to eliminate the restrictions and recordkeeping requirements
for gifts that do not typically create the types of improper incentives
that the Gifts Rule seeks to avoid when gifts are given in relation to
the business of the recipient's employer.\137\ FINRA further stated
that the current guidance, codified by the proposed rule change,
presumes such improprieties may exist when a member reimburses an
employee for the cost of a gift to an employee of another person with
the hope of strengthening the business relationship with them,
regardless of whether the member treats the reimbursement as personal
for accounting purposes.\138\ For these reasons, FINRA declined to
amend the proposed rule change.\139\ However, FINRA stated that it
welcomes continued discussion on whether additional guidance on
personal gifts may be warranted, but noted that under current guidance,
the personal gift exclusion is not intended to cover gifts given for
events that occur frequently or even annually, such as birthdays.\140\
---------------------------------------------------------------------------
\137\ FINRA Letter 1 at 5-6.
\138\ Id.
\139\ Id. at 6.
\140\ Id.
---------------------------------------------------------------------------
The proposed rule change to exclude gifts that are given for
infrequent life events from the gift limit restrictions in FINRA Rule
3220(a) and recordkeeping requirements in FINRA Rule 3220(c), provided
such gifts are customary and reasonable, personal in nature, and not in
relation to the business of the employer of the recipient, is
reasonably designed to distinguish between gifts that FINRA believes
raise the prospect of improper incentives from those that are less
likely to do so. Specifically, requiring that members consider a number
of factors, including the nature of any pre-existing personal or family
relationship between the person giving the gift and the recipient and
whether the associated person paid for the gift, in determining whether
a gift is ``personal in nature'' (and so eligible for this exclusion)
should help members reasonably distinguish between gifts that are
personal and those that are in relation to the business of the
employer. In addition, codifying the presumption that a gift whose cost
is reimbursed by the member is a gift given for business reasons, is
also a reasonable codification of existing guidance, and appropriately
focuses members on the type of gifts that FINRA believes may be
associated with the improprieties the Gifts Rule is meant to address.
Moreover, requiring that any gift given for infrequent life events also
be ``customary and reasonable,'' should help limit the factual
situations under which the exclusion may apply as well as the potential
improper incentives that the Gifts Rule is designed to address. By
excluding certain gifts that FINRA believes are less likely to raise
the prospect of improper incentives, the proposed rule change
appropriately minimizes unnecessary burdens associated with applying
the recordkeeping obligations to such gifts. In addition, proposed Rule
3220.04 should help enhance regulatory clarity by codifying existing
FINRA guidance describing the types of factors a member should consider
in determining whether a gift is ``personal in nature and not in
relation to the business of the employer of the recipient.''
Nevertheless, FINRA has indicated its openness to future discussion
regarding the need for additional guidance. For these reasons, the
proposed rule change is reasonably designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
5. Proposed Rule 3220.05 (Bereavement Gifts)
As originally proposed in the Notice, proposed Rule 3220.04 would
have treated a bereavement gift sent on behalf of a member or its
associated persons as a personal gift given for an infrequent life
event not subject to the gift limit restrictions in FINRA Rule 3220(a)
or the recordkeeping requirements in FINRA Rule 3220(c), provided the
gift was customary and reasonable, personal in nature, and not in
relation to the business of the employer of the recipient. The member
would, therefore, have been required to consider a number of factors,
including the nature of any pre-existing personal or family
relationship between the person giving the gift and the recipient and
whether the associated person paid for the gift, when determining
whether the gift is ``personal in nature and not in relation to the
business of the employer of the recipient.'' \141\ Moreover, if a
member bore the cost of the gift, either directly or by reimbursing an
associated person, FINRA would have presumed the gift was not personal
in nature and instead in relation to the business of the employer of
the recipient and subject to the gift limit and recordkeeping
requirement of FINRA Rule 3220(a) and (c) respectively.\142\
---------------------------------------------------------------------------
\141\ See proposed Rule 3220.04, as originally proposed in the
Notice.
\142\ See id.
---------------------------------------------------------------------------
One commenter opposed this proposed rule change, stating that as
originally proposed Rule 3220.04 should not have bundled bereavement
gifts with personal gifts because current guidance does not treat
reasonable and customary bereavement gifts (regardless of who bears the
cost) as being ``in relation to the business of the employer of the
recipient.'' \143\ As such, this commenter stated that all customary
and reasonable bereavement gifts should not be subject to the gift
limit restrictions in FINRA Rule 3220(a) or the recordkeeping
requirements in FINRA Rule 3220(c), regardless of who bears the cost
for it.\144\
---------------------------------------------------------------------------
\143\ SIFMA Letter 1 at 3.
\144\ Id.
---------------------------------------------------------------------------
In response, FINRA stated that it agreed with the commenter's
``observation that, under current guidance, customary and reasonable
bereavement gifts from members are not considered in relation to the
business of the employer of the recipient'' \145\ and amended the
proposed rule change, separating the proposed supplementary material on
bereavement gifts and personal gifts.\146\ As modified by Amendment No.
1, proposed Rule 3220.05 would state that bereavement gifts that are
customary and reasonable are not considered to be in relation to the
business of the employer of the recipient and, therefore, are not
subject to the gift limit restrictions in FINRA Rule 3220(a) or the
recordkeeping requirements in FINRA Rule 3220(c).
---------------------------------------------------------------------------
\145\ FINRA Letter 1 at 4.
\146\ Id. at 4-5.
---------------------------------------------------------------------------
[[Page 7579]]
Commenters supported the proposed rule change, as modified by
Amendment No. 1.\147\
---------------------------------------------------------------------------
\147\ CAI Letter 2 at 2; SIFMA Letter 2 at 1 (stating that the
amended proposal reflects a balanced and pragmatic approach that
recognizes evolving business practices).
---------------------------------------------------------------------------
The proposed rule change excluding any customary and reasonable
bereavement gift from the gift limit restrictions in FINRA Rule 3220(a)
and recordkeeping requirements in FINRA Rule 3220(c) is reasonably
designed to codify a narrowly tailored exclusion for a type of gift
that FINRA reasonably believes typically does not create the types of
improper incentives that the Gifts Rule seeks to address. Since 2007,
FINRA staff guidance has excluded ``reasonable and customary''
bereavement gifts from the gift limit restrictions by deeming them not
to be ``in relation to the business of the employer of the recipient.''
\148\ Proposed Rule 3220.05 would provide regulatory clarity to members
who were previously relying on FINRA staff guidance.\149\ Proposed Rule
3220.05 limits the exclusion to bereavement gifts that are ``customary
and reasonable,'' and, as FINRA states, are, by their nature,
infrequent, thus limiting the factual situations under which the
exclusion may apply, as well as the potential improper incentives that
the Gifts Rule is designed to address. By excluding certain gifts that
FINRA believes are less likely to raise the prospect of improper
incentives, the proposed rule change appropriately minimizes
unnecessary burdens associated with applying the recordkeeping
obligations to such gifts. For these reasons, the proposed rule change
is reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------
\148\ See Aly Letter.
\149\ Id.
---------------------------------------------------------------------------
6. Proposed Rule 3220.06 (De minimis Gifts and Promotional or
Commemorative Items)
As stated above, proposed Rule 3220.06(a) would state that gifts of
a de minimis value (e.g., pens, notepads, or modest desk ornaments) or
promotional items of nominal value that display the member's logo
(e.g., umbrellas, tote bags, or shirts) are not subject to the gift
limit restrictions in FINRA Rule 3220(a) or the recordkeeping
requirements in FINRA Rule 3220(c), provided that the value of the gift
or promotional item is ``substantially below'' the $300 limit.
Similarly, proposed Rule 3220.06(b) would state that customary and
reasonable solely decorative items commemorating a business transaction
are not subject to the gift limit restrictions in FINRA Rule 3220(a) or
the recordkeeping requirements in FINRA Rule 3220(c).
Several commenters supported the codification of prior guidance,
including the codification of existing FINRA guidance on de minimis
gifts.\150\ Three of these commenters, however, suggested that FINRA
provide additional guidance on the application of proposed Rule
3220.06: \151\ one recommended that FINRA provide guidance on what
constitutes ``substantially below'' the gift limit; \152\ the second
suggested that FINRA amend proposed Rule 3220.06 to set a clear
threshold of $100 for de minimis gifts and promotional items displaying
a firm's logo; \153\ and the third recommended the Commission approve
the proposed rule change but that FINRA consider at a future time
providing examples to distinguish between promotional and de minimis
items to avoid confusion when certain items fall into one or both
categories.\154\
---------------------------------------------------------------------------
\150\ See Trubee Letter at 1 (stating that codifying existing
guidance within the rule text helps eliminate ambiguity around what
constitutes a gift versus personal or de minimis items); ASA Letter
at 2 (stating that the codification of the treatment of personal, de
minimis, and disaster-related gifts, are welcome clarifications that
will help firms implement more effective compliance programs); see
also CAI Letter 1 at 2, Robinhood Letter at 1; SIFMA Letter 1 at 1-2
(stating that SIFMA appreciates FINRA's efforts to incorporate and
substantially codify existing guidance related to the Gifts Rule).
\151\ See CAI Letter 1 at 2-3; Robinhood Letter at 1; SIFMA
Letter 1 at 3.
\152\ CAI Letter 1 at 3.
\153\ Robinhood Letter at 1.
\154\ SIFMA Letter 1 at 4.
---------------------------------------------------------------------------
In response, FINRA stated that by codifying existing guidance
requiring the value of de minimis gifts and promotional items to be
``substantially below'' the gift limit, the proposed rule change will
provide members more flexibility than establishing a firm dollar
threshold.\155\ FINRA also stated that it would not provide additional
guidance at this time, but stated that it would consider what
additional guidance may be warranted if the Commission approves the
proposed rule change.\156\
---------------------------------------------------------------------------
\155\ FINRA Letter 1 at 6.
\156\ Id. at 6, n.16.
---------------------------------------------------------------------------
The proposed rule change to exclude gifts of de minimis value and
promotional items of nominal value that display the member's logo from
the gift limit restrictions in FINRA Rule 3220(a) and recordkeeping
requirements in FINRA Rule 3220(c) is reasonably designed to
distinguish between gifts that FINRA believes raise the prospect of
improper incentives from those that are less likely to do so. In
addition, the proposed rule change raising to $300 from $100 the value
that de minimis gifts and promotional items subject to proposed Rule
3220.06 must fall ``substantially below'' in order to qualify for the
exclusion is reasonably designed to account for current and anticipated
economic conditions (described above) while helping limit the factual
situations under which the exclusion may apply, as well as the
potential improper incentives that the Gifts Rule is designed to
address. By excluding certain gifts that FINRA believes are less likely
to raise the prospect of improper incentives, the proposed rule change
appropriately minimizes unnecessary burdens associated with applying
the recordkeeping obligations to such gifts. Regarding commenters'
requests for additional guidance, FINRA indicated that it would
consider what additional guidance may be warranted if the Commission
approves the proposed rule change.
Similarly, the proposed rule change to exclude customary and
reasonable ``solely decorative'' items commemorating a business
transaction from the gift limit restrictions in FINRA Rule 3220(a) and
recordkeeping requirements in FINRA Rule 3220(c) is reasonably designed
to distinguish between gifts that FINRA believes raise the prospect of
improper incentives from those items that do not. In particular,
requiring that such gifts be ``customary and reasonable'' would subject
such common commemorative items as Lucite tombstones or plaques to
reasonable limitations given the potential improprieties that may be
associated with the receipt of such items. Additionally, as FINRA
notes, the restrictions of the Gifts Rule would apply where an item is
not solely decorative, irrespective of whether the item was intended to
commemorate a business transaction.\157\ In addition, proposed Rule
3220.06 should help facilitate members' compliance with the rule by
codifying existing guidance with which members are familiar. By
excluding certain gifts that FINRA believes are less likely to raise
the prospect of improper incentives, the proposed rule change
appropriately minimizes unnecessary burdens associated with applying
the recordkeeping obligations to such gifts. Regarding commenter
requests for
[[Page 7580]]
additional guidance, FINRA indicated that it would consider what
additional guidance may be warranted if the Commission approves the
proposed rule change. For these reasons, the proposed rule change is
reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------
\157\ Notice at 25677. For example, FINRA stated that providing
employees of an Institutional Customer with elaborate electronic
equipment following the closing of a transaction would be subject to
the gift limit. Id.
---------------------------------------------------------------------------
7. Proposed Rule 3220.07 (Donations Due to Federally Declared Major
Disasters)
As stated above, proposed Rule 3220.07 would state that donations
by a member or an associated person to any person, principal,
proprietor, employee, agent, or representative of another person to
provide assistance to the individual for losses sustained in a natural
event that the President has declared to be a major disaster, such as a
wildfire, hurricane, tornado, earthquake, or flood, are not considered
``in relation to the business of the employer of the recipient'' for
purposes of FINRA Rule 3220(a). Proposed Rule 3220.07 would also state
that such donations are not subject to the gift limit restrictions in
FINRA Rule 3220(a) or the recordkeeping requirements of FINRA Rule
3220(c).
Commenters supported the proposed rule change,\158\ including one
commenter stating that codifying the treatment of disaster-related
gifts should help members implement more effective compliance
programs.\159\
---------------------------------------------------------------------------
\158\ See supra note 87.
\159\ ASA Letter at 2.
---------------------------------------------------------------------------
The proposed rule change, which codifies guidance first issued in
2020,\160\ is narrowly tailored to permit member firms and their
associated persons to assist individuals solely for losses sustained in
Presidentially declared major disasters, which FINRA notes are, by
their nature, unpredictable and catastrophic.\161\ Limiting such gifts
to losses associated with a ``major disaster'' declared ``by the
President'' will help to facilitate compliance by providing a clear
precondition to the rule's application and also restrict the factual
situations in which it applies. Proposed Rule 3220.07 would thus
appropriately account for the potential for improprieties that may be
associated with such gifts in light of the wish of members and
associated persons to help the victims of Presidentially declared major
disasters. By excluding certain gifts that FINRA believes are less
likely to raise the prospect of improper incentives, the proposed rule
change appropriately minimizes unnecessary burdens associated with
applying the recordkeeping obligations to such gifts. For these
reasons, the proposed rule change is reasonably designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest.
---------------------------------------------------------------------------
\160\ See FAQs.
\161\ See Notice at 25677.
---------------------------------------------------------------------------
8. Proposed Rule 3220.08 (Supervision and Recordkeeping)
As stated above, proposed Rule 3220.08 would state that FINRA Rule
3110 requires a member to have a supervisory system reasonably designed
to achieve compliance with FINRA Rule 3220. To meet these standards,
proposed Rule 3220.08 would require members to have systems and
procedures reasonably designed to ensure that payments and gratuities
in relation to the business of the employer of the recipient given by
the member and its associated persons to employees of another person
are: (a) reported to the member; (b) reviewed for compliance with FINRA
Rule 3220; and (c) maintained in the member's records. In addition,
proposed Rule 3220.08 would require that such procedures be reasonably
designed to ensure that an associated person who is giving a payment or
gratuity is not responsible for determining whether such payment or
gratuity is in relation to the business of the recipient's employer.
Proposed Rule 3220.08 would further state that members are not required
to maintain records of gifts that are excluded from the restrictions of
the Gifts Rule consistent with the requirements of proposed Rules
3220.04 through 3220.07.
Commenters supported the proposed rule change,\162\ including one
commenter stating that the proposed rule change's emphasis on robust
recordkeeping and supervision--while excluding certain categories of
gifts from these requirements--appropriately balances regulatory
objectives with practical compliance burdens.\163\
---------------------------------------------------------------------------
\162\ See supra note 87.
\163\ ASA Letter at 2.
---------------------------------------------------------------------------
The proposed rule change to require a member to have a supervisory
system reasonably designed to ensure compliance with the Gifts Rule
will promote regulatory clarity and compliance. Additionally, requiring
procedures reasonably designed to ensure that an associated person who
is giving a payment or gratuity is not responsible for determining
whether such payment or gratuity is in relation to the business of the
recipient's employer should encourage a more objective assessment of
whether a gift is personal. For these reasons, the proposed rule change
is reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
9. Proposed FINRA Rule 3220.09 (Gifts to a Member's Associated Persons
or Individual Retail Customers)
As stated above, the proposed rule change would add new Rule
3220.09, stating that FINRA Rule 3220 would not apply to gifts from a
member to its own associated persons, or to gifts from a member or an
associated person to individual retail customers.
Commenters supported the proposed rule change,\164\ but two of them
recommended that FINRA clarify the scope of the term ``retail
customer'' for purposes of the Gifts Rule.\165\ One of these commenters
also recommended that FINRA amend Rule 3220 in the future to clarify
that it does not apply to gifts received by members' employees.\166\
---------------------------------------------------------------------------
\164\ See supra note 87.
\165\ BDA Letter at 2 (requesting FINRA clarify the scope of
``retail customer'' and any regulatory expectations appliable to
those customers in the context of the gifts rule); SIFMA Letter 1 at
2-3 (requesting future discussion with FINRA about ``the contours of
who is a retail customer'').
\166\ BDA Letter at 2.
---------------------------------------------------------------------------
In response, FINRA stated that the Gifts Rule is intended to avoid
improprieties associated with gifts from a member or its associated
person to an employee of an institutional customer and does not apply
to gifts from members or associated persons to individual retail
customers.\167\ FINRA noted, however, that members may have policies
and procedures that restrict or prohibit gifts to individual retail
customers.\168\ In addition, FINRA stated that it is sufficiently clear
from the scope articulated in FINRA Rule 3220(a) that FINRA Rule 3220
applies only to gifts a member or an associated person gives 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. For these reasons, FINRA
declined to further amend the proposed rule change.
---------------------------------------------------------------------------
\167\ FINRA Letter 1 at 6-7.
\168\ Id. at 6.
---------------------------------------------------------------------------
The proposed rule change excludes from the Gifts Rule a gift from:
(1) a member to its own associated persons, or (2) a member or an
associated person
[[Page 7581]]
to an individual retail customer. Gifts to retail customers are outside
the scope of the proposed rule change, although FINRA notes that member
firms may have policies and procedures that restrict or prohibit gifts
to individual retail customers. The proposed rule change will promote
regulatory clarity regarding the scope of the Gifts Rule, and the types
of gifts that are not covered by the Gifts Rule. For these reasons, the
proposed rule change is reasonably designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
D. Proposed Conforming Changes to the Non-Cash Compensation Rules
As stated above, the proposed rule change would make conforming
changes to the respective gift limits of FINRA's Non-Cash Compensation
Rules.\169\
---------------------------------------------------------------------------
\169\ See FINRA Rule 2320(g)(4) (Variable Contracts of an
Insurance Company); FINRA Rule 2341(l)(5) (Investment Company
Securities); FINRA Rule 2310(c) (Direct Participation Programs);
FINRA Rule 5110(f) (Corporate Financing Rule--Underwriting Terms and
Arrangements).
---------------------------------------------------------------------------
One commenter expressly supported the proposed conforming changes,
stating that updating FINRA's Non-Cash Compensation Rules to reflect
the new gift limit will promote consistency and reduce confusion for
members subject to multiple regulatory frameworks.\170\
---------------------------------------------------------------------------
\170\ ASA Letter at 2.
---------------------------------------------------------------------------
The proposed rule change reasonably conforms FINRA's Non-Cash
Compensation Rules to the proposed changes to the Gifts Rule. The
proposed rule change will provide consistency across the different gift
limits in FINRA's rule book, facilitating members' compliance with
those rules. For these reasons, the proposed rule change is reasonably
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, and, in general, to
protect investors and the public interest.
IV. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change is consistent with Section 15A(b)(6) of the
Exchange Act, which requires, among other things, that FINRA rules be
designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, and, in general,
protect investors and the public interest.\171\
---------------------------------------------------------------------------
\171\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \172\ that the proposed rule change (SR-FINRA-2025-003)
be, and hereby is, approved.
---------------------------------------------------------------------------
\172\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\173\
---------------------------------------------------------------------------
\173\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-03127 Filed 2-17-26; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on February 18, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.