A registered representative of a FINRA member broker-dealer purchases two concert tickets valued at $250 each and attends the performance alongside a valued corporate client. How is this expense categorized under FINRA Rule 3220 regarding gifts and gratuities?
- It is treated as routine business entertainment and is excluded from the $100 annual gift limit, provided the host representative attends and the event is not excessive or frequent.Answer
- BIt constitutes an automatic violation of FINRA rules because any item or event given to a customer exceeding $100 in value is strictly prohibited.
- CIt requires prior written approval from the Securities and Exchange Commission (SEC) before the representative can purchase tickets over $100.
- DIt is permitted only if the representative submits a formal Municipal Finance Professional (MFP) disclosure filing under MSRB Rule G-37.
Answer
The transaction is categorized as routine business entertainment and is excluded from the $100 annual gift limit because the registered representative accompanies the client to the event.
Under FINRA Rule 3220 (Gifts and Gratuities), ordinary and customary business entertainment—such as sporting events, theater, or concerts—is not subject to the $100 annual gift limit as long as the registered representative accompanies the guest and the event is not overly frequent or lavish.
Step-by-Step Solution
Key Concept
FINRA Rule 3220 Business Entertainment Exemption