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FINRA Proposes Changes to Gift and Non-Cash Comp Rules

sports tickets

FINRA has proposed changes to the Gifts, Gratuities and Non-Cash Compensation Rules including increasing the gift limit, encompassing all securities, and requiring policies and procedures for business entertainment.  The proposed new rules would raise the gift limit from $100 to $175, mostly to account for inflation.  The new rules would also impose the non-cash compensation restrictions on all securities transactions rather than just mutual funds, variable annuities, DPPs and public offerings.  The proposal would also replace previous guidance on business entertainment (allowing “ordinary and usual business entertainment”) with a requirement to implement policies and procedures ensuring no quid pro quos, defining permissible business entertainment, training, and recordkeeping.  Comments are due on the proposal by September 23.

OUR TAKE: All of these changes make sense.  The $100 gift limit is way too low and should be raised (although $175 seems like an arbitrary number).  The business entertainment rules have always been too subjective, whereas firm-tailored policies and procedures can apply some bright line rules.  And, there really was no logical reason why the non-cash compensation rules only applied to certain transactions.

http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-16-29.pdf