Gift Rule

Broker dealers may not pay compensation to employees of other broker dealers. If a broker dealer wants to give a gift to an employee of another broker dealer, it must:

  • Be valued at less than $100 per person per year
  • Be given directly to the employing member firm for distribution to the employee
  • Have the employing member’s prior approval for the gift

The employing member must obtain a record of the gift, including the name of the giver, the name of the recipient, and the nature of the gift.  These rules have been established to ensure that broker dealers do not try to influence the employees of other broker dealers.  An exception to this rule would be in cases where an employee of one broker dealer performs services for another broker dealer under an employment contract. The following are also excluded from the $100 limit:

  • Occasional meals
  • Occasional tickets to sporting events
  • Business-related travel

Records of gifts and employment contracts must be retained for three years. Prior FINRA approval is not required for employment contracts between members. The gift rule also applies to gifts given to or received from customers of the firm or agent. In the case of a mutual fund holding a seminar, the mutual fund may pay for registered representative’s travel related expenses and the seminar must be held at a “reasonable” location. Spouses of agents are allowed to attend; however, the mutual fund may only pay for the travel expenses of the agent. The agent’s expenses may not be paid for by the fund in exchange for past sales or the promise of sales in the future.

Take Note!

Firms and agents also may not give a gift to influence any report or dissemination of information designed to influence the price of a security.

Series 10 Exam Test Bank

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