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

A broker-dealer compliance officer is evaluating several proposed activities submitted by associated personnel. Which of the following proposed activities are fully permissible under FINRA and MSRB rules governing gifts, gratuities, and political contributions?

  1. A registered representative receives a $70 holiday gift basket at their office from a mutual fund sponsor, having received no other gifts from this sponsor during the calendar year.Answer
  2. A Municipal Finance Professional (MFP) makes a $200 campaign contribution to a mayoral candidate running in the city where the MFP resides and is eligible to vote.Answer
  3. C
    A Municipal Finance Professional (MFP) contributes $100 to a gubernatorial candidate in a neighboring state where the MFP does not reside and cannot vote.
  4. D
    A registered representative purchases two non-transferable concert tickets valued at 120each(120 each ( 240 total) and mails them to a valued client without accompanying the client to the event.

Answer

The permissible activities are receiving a 70giftbasket(underthe70 gift basket (under the 100 annual FINRA limit) and an MFP contributing 200toamayoralcandidateintheirvotingdistrict(withinthe200 to a mayoral candidate in their voting district (within the 250 MSRB Rule G-37 voting de minimis exemption).
Receiving a 70giftbasketcomplieswithFINRARule3220becauseitisbelowthe70 gift basket complies with FINRA Rule 3220 because it is below the 100 annual aggregate limit per recipient. Additionally, an MFP contributing 200toalocalmayoralcandidateforwhomtheycanvotefallssquarelywithintheMSRBRuleG−37deminimisexemptionofupto200 to a local mayoral candidate for whom they can vote falls squarely within the MSRB Rule G-37 de minimis exemption of up to 250 per election.

Step-by-Step Solution

1
Evaluate the gift basket under FINRA Rule 3220.
FINRA Rule 3220 prohibits associated persons from giving or receiving gifts exceeding 100perindividualrecipientperyear.A100 per individual recipient per year. A 70 gift basket is under the limit and is permissible.
Gift value does not exceed the annual aggregate cap of $100 per recipient.
2
Evaluate the MFP campaign contribution of $200 in their voting district under MSRB Rule G-37.
MSRB Rule G-37 allows an MFP to contribute up to 250perelectiontoacandidateiftheMFPisentitledtovoteforthatcandidate.A250 per election to a candidate if the MFP is entitled to vote for that candidate. A 200 contribution by an eligible voter falls within the de minimis allowance and is permissible.
The MFP is an eligible voter in that district and the contribution is within the $250 per election threshold.
3
Evaluate the MFP contribution of $100 outside their voting district.
If an MFP contributes any amount to an official for whom they cannot vote, the de minimis exemption does NOT apply, resulting in a 2-year ban on negotiated municipal securities business with that issuer.
Voting entitlement is a mandatory condition for the $250 de minimis exemption.
4
Evaluate the unattended concert tickets under FINRA Rule 3220.
Entertainment tickets are treated as gifts subject to the 100limitunlesstherepresentativeaccompaniestheclient.Sending100 limit unless the representative accompanies the client. Sending 240 in unattended tickets exceeds the $100 gift limit and is a violation.
Failure of the representative to host/attend reclassifies the tickets from normal business entertainment to an non-compliant gift.

Key Concept

FINRA Rule 3220 (100annualgiftcapandunattendedticketrules)andMSRBRuleG−37(100 annual gift cap and unattended ticket rules) and MSRB Rule G-37 ( 250 voting de minimis political contribution exemption).
Estimated Time:1m 30s
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities