Are your Gift & Entertainment Policies Holiday Ready?

With the holidays just around the corner, it’s the perfect time for your company to review its gift and entertainment policies and procedures with firm employees. Provided are some important tips your representatives should keep in mind this holiday season.

Rule Background

– The value of a gift is based on its cost or its market value, exclusive of tax or delivery charges. In general, gifts should be valued at whichever is higher – the cost or market value.

– The gift limitation is calculated using the aggregate of all gifts given to any one individual per year. For example, a gift of a $50 bottle of wine in November and a $75 cookie basket in December of the same year, to the same person, would exceed the $100 annual limitation.

– FINRA’s rule does not apply to gifts of de minimis value or to promotional items of nominal value that display the member firm’s logo.

– FINRA’s rule generally does not apply to personal gifts (e.g. wedding gifts), as long as the gifts are not “in relation to the business of the employer of the recipient.”

* Always seek help if you aren’t sure what you can or can’t do.

As a firm, it is equally important to have the appropriate systems and procedures in place to ensure that the business gifts that are given are reported to the firm, aggregated by recipient, reviewed for compliance and maintained in the firm’s records. 

In addition to maintaining an active audit log, it is equally important for firms to outline in their compliance procedures whether their firm is aggregating all gifts given by the firm and its associated persons on a calendar year, fiscal year, or ongoing basis that is dependent on when the first gift to any particular recipient is received.

Disciplinary Focus

Just this past month, FINRA fined one individual $10,000 and suspended him from the industry for four months due to the findings that he accepted monetary gifts totaling $58,000 from a customer at his firm. The findings stated that the firm had in place a policy prohibiting registered representatives from accepting monetary payments and/or gifts in excess of $100 per year from firm customers. FINRA found that the representative certified his understanding of these policies in his annual compliance questionnaire and therefore should have known better.

Proposed Amendments 

In August 2016, FINRA proposed amendments to the gifts, gratuities and non-cash compensation rules to, among other things, increase the gift limit from $100 to $175 per person per year and include a de minimis threshold below which firms would not have to keep records of gifts given or received. It is important to note that while this regulation was proposed, the SEC has not yet authorized any rule change.

To learn more about Quest CE’s gift and entertainment disclosure tracking solution, click here. If you are interested in offering additional training to firm employees on FINRA’s Gifts and Entertainment rule, please contact a Quest CE representative at sales@questce.com or call 877.593.3366 for information on course options.