By Robert R. Boeche

On June 12, 2025, the SEC withdrew fourteen regulations that were proposed over the past three years, stating they have no intent to issue final rules regarding the proposed.[1] When asked about the mass withdrawal, the SEC stated it is “getting back to [its] roots.”[2] Amongst the rules withdrawn included:

Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker Dealers and Investment Advisers
The proposed was intended to address certain interactions between broker-dealers or investment advisers and investors through these firms’ use of predictive data analytics. This specifically looked at analytical, technological, or computational function, algorithm, model, correlation matrix, or similar method or process that optimizes for, predicts, guides, forecasts, or directs investment-related behaviors or outcomes in an investor interaction.[3]

Safeguarding Advisory Client Assets
The proposed update would have expanded the definition of “assets” to include “funds, securities, or other positions held in a client’s account,” as opposed to the custody rule’s use of “funds and securities,” I also would have explicitly included advisers who have discretionary authority to trade within a client account to be included in the definition of custody, placed additional requirements on custodians, and more. [4] The proposed was intended to clarify and refine the existing custody rule to assist the SEC in oversight and risk-assessment abilities.[5]

Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies
The proposed would have required registered investment advisers and investment companies to adopt and implement written cybersecurity policies and procedures designed to address cybersecurity risks, disclose information about cybersecurity risks and incidents, report information confidentially to the Commission about certain cybersecurity incidents, and maintain related records.[6] This included enhanced disclosures and reporting of incidents, implementation of additional risk management policies and procedures related to cybersecurity, and recordkeeping enhancements.[7]

Regulation Best Execution
Proposed Regulation Best Execution would have changed the existing regulatory framework concerning the duty of best execution by requiring detailed policies and procedures for all broker-dealers and additional policies and procedures for broker-dealers engaging in certain transactions with retail customers.[8] The proposed would have addressed handling conflicts of interest within orders, as well as policies and procedures for crypto or digital assets.[9]

Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental Social and Governance Investment Practices
The Proposed would have required, registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies, to provide additional information regarding their environmental, social, and governance investment practices.[10] The enhanced disclosures would have been required for funds, to be included in Form ADV Part 1A and 2A, and Form N-CEN.[11]

Outsourcing by Investment Advisers
The proposed rule under the Advisers Act would prohibit advisers from outsourcing certain services or functions without first meeting certain requirements.[12] The Commission also proposed related form amendments to collect information about the service providers defined in the proposed rule.[13]

Recommendations
In light of the aforementioned withdrawals, firms should consider how it impacts them both now and in the future. If you have questions about what these withdrawals mean for the regulatory environment or your specific business, give us a call to discuss the potential impacts. 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] See, https://www.sec.gov/files/rules/final/2025/33-11377.pdf.

[2] Financial Times, Trump SEC Chair Scraps Proposed Market Rules as He Charts New Paths, June 19, 2025, https://www.ft.com/content/08537ac6-c47b-4bd3-bae6-782ea8446afb

[3] Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker Dealers and Investment Advisers, 88 Fed. Reg. 54768 (Aug. 9, 2023) (to be codified at 17 C.F.R. pts. 275, 276).

[4] Safeguarding Advisory Client Assets, 88 Fed. Reg. 14,672 (proposed Mar. 9, 2023) (to be codified at 17 C.F.R. pts. 275 & 279), https://www.federalregister.gov/documents/2023/03/09/2023-03681/safeguarding-advisory-client-assets.

[6] Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies; Reopening of Comment Period, 88 Fed. Reg. 16,921 (proposed Mar. 21, 2023) (to be codified at 17?C.F.R. pts. 230, 232, 239, 270, 274, 275 & 279).

[8] Regulation Best Execution; Proposed Rule, 88 Fed. Reg. 5440 (Jan. 27, 2023) (to be codified at 17 C.F.R. pts. 240 & 242).

[10] Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices, 87 Fed. Reg.36654 (proposed June 17, 2022) (to be codified at 17 C.F.R. pts. 200, 230, 232, 239, 249, 274 & 279)

[12] Outsourcing by Investment Advisers, 87 Fed. Reg.68816 (Nov.16,2022) (proposed rule) (to be codified at 17C.F.R. pts.275 & 279).

By Robert R. Boeche

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).

[5] https://www.finra.org/rules-guidance/notices/16-29#:~:text=As%20discussed%20further%20below%2C%20FINRA,interpretive%20letters%20into%20the%20rules.

[6] https://www.securitieslaw.com/blog/2023/05/finra-plans-to-update-rule-setting-100-limit-on-broker-client-gifts/#:~:text=In%202016%2C%20FINRA%20proposed%20raising,through%20our%20online%20contact%20form.

[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.