Don’t Let Holiday Gift Giving Compromise Compliance

By Heather Vitek

Blue robins eggs in a nest on a tree in Central Kentucky

The holidays are quickly approaching, and now is a good time to ensure your gift and entertainment policies and procedures are up to date.

Broker Dealer Firms

FINRA Rule 3220 (the Gifts Rule) prohibits any member or 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. The Rule also requires members to keep separate records regarding gifts and gratuities.

The gift limit of $100 is calculated using the aggregate of all gifts given to any one individual per year.

Entertainment should not be in excess. For example, when giving tickets to concerts, sporting events, etc., a member of your firm must attend the event with the recipient in order to be considered entertainment if the value is over $100. If no one from your firm is present, the tickets would be considered a gift and would violate the Gifts Rule.

Investment Advisory Firms

While the SEC does not have a rule regarding gifts and entertainment, Advisors should follow the anti-fraud provisions of the Investment Adviser’s Act that regulate gifts, gratuities, and entertainment. Investment Advisors should not give or accept extravagant gifts or gifts designed to influence the recipient.  

Review your firm’s Policies and Procedures/Code of Ethics regarding gifts and entertainment to ensure that your review and approval procedures are sufficient. Consider sending a reminder of your firm’s policies and procedures to your associated persons.

Oyster Consulting can review your firm’s Code of Ethics and Policies and Procedures, not only with regard to Gifts and Entertainment, but also to assess areas where these documents may need further enhancement to remain compliant. Oyster Solutions GRC Software makes managing your compliance calendar and Annual Review processes easier and more efficient, using workflows and automated reporting

About The Author
Photo of Heather Vitek

Heather Vitek

Heather Vitek is a Financial Services professional with over 25 years of industry experience. Heather has extensive expertise in investment advisor Operations and Compliance.