Proposed Changes to FINRA Rule 3220

Proposed changes to FINRA Rule 3220


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Full video transcript available below:

Hello, everyone, and welcome to today's webinar, hosted by me, Joe Boyhan of MCO and Jennifer Lin, Partner and Head of the Compliance Group at DLA.

Today's webinar is titled, "Best Practices to Keep your Firm SEC and FINRA Compliant this Season." 


We can move to the next slide. You know, it's important to note that there is an outstanding proposal made by FINRA to make some changes, proposed changes, to Rule 3220. An initiative in August of 2016, where FINRA underwent a review, a sort of historic look back at their gifts and entertainment policy, as well as the practices amongst firms. It raises a proposal and a public comment period to change these rules. So some of the highlights of the rules is that the proposed rule changes would amend the dollar limit to increase this limit to $175 per person per year. This dollar value was determined based essentially on the rise of inflation. The proposed amendments would also incorporate existing guidance and interpretive positions such as the aggregation, valuation, and supervision requirements that are currently set forth in other FINRA guidance.

So the new supplementary material to Rule 3220 would state that, among other things, there's no express exclusion from Rule 3220 for gifts given during the course of business, entertainment, unless the gift is of de minimis value or a commercial or a commemorative item. Gifts must be valued at the higher of cost or market value. FINRA members must aggregate all gifts given by the member and each associated person of the member to a particular recipient over the course of the year for purposes of the $175 limit.

Bereavement gifts that are customary and reasonable are not considered to be in relation to the business of the employer of the recipient and therefore not subject to restrictions of Rule 3220 or its recordkeeping requirements. 

Gifts given for infrequent life events, such as a wedding gift or a congratulatory gift for the birth of a child, are not subject to the restrictions of Rule 3220 or its recordkeeping requirements, provided that the gifts are customary and reasonable, they are personal in nature, and not related to the business of the employer or the recipient.

Finally, gifts of de minimis value, promotional items of nominal value, and commemorative items are not subject to the restrictions of Rule 3220 or its recordkeeping requirements, provided that they meet specified conditions.

Additionally, FINRA is also proposing to codify existing guidance requiring firms to have a supervisory and recordkeeping system in place that are reasonably designed to achieve compliance with Rule 3220. 

So I think we can expect as an industry that there will be some updates made to Rule 3220 and hopefully we'll see that in the next year or two.





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