Question

Difficulty: MediumGifts, Gratuities, Political Contributions, and Outside Business Activities

Under FINRA Rule 3220 (Gifts and Gratuities), a registered representative who hosts a client at a sporting event where the representative attends with the client is exempt from the $100 annual gift limitation per recipient, provided the entertainment is neither frequent nor excessive.

Answer: Answer

Answer

True. Hosted business entertainment where the representative accompanies the guest is exempt from the $100 annual gift cap, provided it is not excessive or frequent.

Under FINRA Rule 3220 and guidance governing business entertainment, an event hosted by a representative where the representative personally accompanies the client is categorized as business entertainment rather than a gift. Consequently, it is exempt from the annual $100 limit per recipient, provided the expense is reasonable and customary.

Step-by-Step Solution

1

Differentiate between an unconditional gift and hosted business entertainment under FINRA Rule 3220.

Unconditional gifts (or tickets given to a client without representative attendance) are capped at $100 per recipient per year.

Without representative attendance, the item is considered a direct gift of value.

2

Apply the attendance exception criteria.

Because the representative personally attends the event with the client, the expense qualifies as business entertainment rather than a gift.

Personal hosting creates a legitimate business networking context, taking the event outside the strict $100 gift limit.

Key Concept

FINRA Rule 3220 Business Entertainment Exception

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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities