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Question

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

A compliance officer is reviewing proposed activities involving registered representatives and Municipal Finance Professionals (MFPs) at a FINRA member broker-dealer. Which of the following statements regarding regulatory compliance under FINRA and MSRB rules are correct?

  1. Attending a sporting event with a corporate client where the representative accompanies the client is classified as allowable business entertainment rather than a gift under FINRA Rule 3220.Answer
  2. B
    Gifting an unattended $150 concert ticket to a financial officer of a customer account complies with FINRA rules as long as the ticket is purchased with personal funds.
  3. A Municipal Finance Professional (MFP) who contributes $200 of personal funds to a mayoral candidate's election campaign in their home voting district avoids triggering MSRB Rule G-37's two-year restriction on negotiated municipal securities business.Answer
  4. D
    Accepting a compensated weekend lecturing role at an educational institution is permitted without notifying the broker-dealer, provided the employment occurs entirely outside normal business hours.

Answer

The correct statements are that accompanying a client to a sporting event is classified as allowable business entertainment under FINRA Rule 3220, and that an MFP contributing $200 to an issuer candidate in their home voting district falls within MSRB Rule G-37's de minimis exception.
The statement regarding accompanying a client to a sporting event is correct because hosting and attending an event with a customer is classified as legitimate business entertainment rather than an unconditional gift, making it exempt from FINRA Rule 3220's 100annualcap.Thestatementregardingthe100 annual cap. The statement regarding the 200 political contribution is also correct because MSRB Rule G-37 contains a de minimis exemption allowing Municipal Finance Professionals (MFPs) to contribute up to $250 per election to an official for whom the MFP is entitled to vote without triggering the two-year prohibition on negotiated municipal securities business.

Step-by-Step Solution

1
Evaluate the gift versus business entertainment distinction under FINRA Rule 3220.
Accompanying a guest makes the activity business entertainment (exempt from the 100giftcap),whereasgivinganunattendedticketisanunconditionalgiftsubjecttothe100 gift cap), whereas giving an unattended ticket is an unconditional gift subject to the 100 annual limit per recipient.
Rule 3220 restricts gifts to $100 per person per year, but normal business entertainment hosted by the representative is permitted.
2
Analyze political contribution limits under MSRB Rule G-37.
The 200contributionisbelowthe200 contribution is below the 250 de minimis threshold and made to a candidate for whom the MFP can vote.
MSRB Rule G-37 allows MFPs to contribute up to $250 per election to candidates in districts where they are eligible to vote without causing a two-year ban on negotiated underwriting.
3
Assess Outside Business Activity (OBA) requirements under FINRA Rule 3270.
Compensated teaching requires prior written notice to the firm regardless of working hours.
FINRA Rule 3270 mandates prior written notice for all compensated employment outside the member firm.

Key Concept

Regulations governing gifts, political contributions, and outside business activities
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities