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FINRA Proposes Increasing Gift Limit
Earlier this year, FINRA released its proposal to update Rule 3220, Influencing or Rewarding Employees of Others (the “Gift Rule”)[1]. The Gift Rule prohibits any member or person associated with a member, directly or indirectly, from giving or allowing to be given anything of value in excess of $100 to any person where such gift is in relation to the business of the recipient[2]. Similar to the current rule, this proposed rule would not apply to gifts from a member to its own associated persons, or gifts from a member or its associated person to an individual retail customer[3]
Background
The current gift limit of $100 has been in place since 1992[4]. In 2016, FINRA proposed raising the limit in the Gift Rule from $100 to $175 to account for inflation[5]. At the time, the SEC delayed the proposal while developing Regulation Best Interest to ensure cohesiveness across regulations[6]. Ultimately, the final rule for Regulation Best Interest instead included a ban on sales contests and incentivized recommendations that are not in the customer’s best interest, and did not address guidance relating to gifts[7].
The Proposed Gift Rule
The new proposal suggests an increase of the current gift limit from $100 to $250 per person, per year, provide exemptive relief, and incorporate existing guidance and interpretive letters into the final rule[8].
Increasing the Limit from $100 to $250
FINRA concluded $250 was the appropriate increase to apply to the rule by taking the average of inflation over the past 32 years, compounding the increase in consumer pricing, and applying that to the current $100 limit[9]. FINRA believes this will assist in ensuring the limit keeps pace with inflation, without risking investor protection[10].
Exemptive Relief
FINRA proposed to authorize its staff to conditionally or unconditionally grant an exemption from any of the provisions in the proposed Gift Rule for good cause shown, after taking into account all relevant factors that the exemption is consistent with the Gift Rule, protection of investors, and the public interest[11]. Although FINRA does not enumerate the specific factors it would consider in granting relief, it notes its forthcoming proposal to amend Rule 9610 will include a list of rules to guide members on which exemptive relief may be sought[12].
Incorporating Existing Guidance
Over the years, FINRA has issued guidance on various interpretive issues related to the Gift Rule[13]. The proposed rule would incorporate and codify the previous guidance including that members must aggregate all gifts over the course of a year, how gifts are valued, and recordkeeping requirements[14].
Following the inclusion of such guidance, the proposed intends to include the exclusion of incidental gifts related to business entertainment, de minimis gifts, or promotional or commemorative gifts[15]. Gifts such as pens, notepads, or plaques given during business entertainment would be excluded under this proposal due to the de minimis and commemorative nature of the gift. The cost of the entertainment event, or food and beverages in quantities beyond what could reasonably be consumed during the event, would need to be included in your recordkeeping[16].
Implementation Effects of the Proposed Gift Rule
Adoption of the proposed rule would provide greater clarity for broker-dealers subject to FINRA’s jurisdiction. FINRA intends the proposed to enhance efficiency without compromising protection for investors and the public interest. For registered investment advisers, FINRA has served as guidance for best practices in many areas where the SEC does not have regulatory framework. If you have questions or concerns regarding how the implementation of the proposed Gift Rule could affect your firm, reach out and we can review your recordkeeping procedures or provide guidance on establishing such policies and procedures. With offices in San Diego, Irvine, Los Angeles, San Francisco, and New York, Shustak Reynolds & Partners, P.C. represents investment advisers, broker-dealers, registered representatives, and high-net-worth investors across the country. We are prepared to help our clients understand and navigate these changes with strategic advice and robust legal representation. Contact Shustak Reynolds & Partners, P.C. today for a confidential consultation.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.
We represent many investment advisors, financial professionals, broker-dealers, registered representatives, investors and businesses.
Attorney Robert R. Boeche can be reached in the firm’s San Diego office at (619) 696-9500.
[1] Self-Regulatory Orgs.; Financial Indus. Regulatory Auth., Inc.; Notice of Filing of a Proposed Rule Change to Amend Rule 3220 (Gifts and Gratuities), File No. SR–FINRA–2025–003 (May 2025), https://www.finra.org/sites/default/files/2025-05/sr-finra-2025-003.pdf.
[4] In 1992, FINRA increased the gift limit from $50 to $100. See Securities Exchange Act Release No. 31662 (December 28, 1992), 58 FR 370 (January 5,1993) (Order Approving File No. SR-NASD-92-40).
[7] See, Regulation Best Interest: The Broker-Dealer Standard of Conduct, 17 CFR § 240.15l-1 (2019), https://www.govinfo.gov/content/pkg/FR-2019-07-12/pdf/2019-12164.pdf
[8] Notice of Filing of a Proposed Rule Change to Amend Rule 3220 (Gifts and Gratuities), supra note 1 at 3.