NASD Rule 3060 - Influencing or Rewarding Employees of Others

Application of NASD Rule 3060 to reasonable and customary bereavement gifts.



December 17, 2007

Ms. Amal Aly
SIFMA
Managing Director and Associate General Counsel
120 Broadway
New York, NY 10271-0080

Re: Reasonable and Customary Bereavement Gifts

Dear Ms Aly:

In your letter dated December 11, 2007, SIFMA asks whether NASD Rule 3060 prohibits bereavement gifts sent on behalf of a member firm or its associated persons to acknowledge the death of an employee of a client, or a member of such employee’s immediate family. For purposes of this letter, immediate family is defined as the employee’s parents, parents-in-law, siblings, children or spouse.

NASD Rule 3060 prohibits any member or person associated with a member from giving, or permitting to be given, anything of value in excess of $100 per individual per year where such payment is in relation to the business of the recipient’s employer. The rule protects against improprieties that may arise when members or their associated persons give gifts or gratuities to employees of a customer.1

In your letter, you state that you believe that bereavement gifts are “expressions [of sympathy that] so clearly transcend any business relationship and are so engrained in societal and business norms, that they should not be included in the category of gifts deemed to have the potential to influence the actions of others.” Your letter adds that imposing a $100 limit on bereavement gifts forces firms “into the awkward position of having to give something uncustomary and inappropriate (e.g., de minimis valued flowers) or ignoring the fact of the individual’s loss altogether.” Finally, you state that bereavement gifts are mostly symbolic in nature and offer little utility to the recipient.

FINRA staff agrees that reasonable and customary bereavement gifts (e.g., appropriate flowers, food platter for the mourners) are not “in relation to the business of the employer of the recipient.” FINRA staff is not specifying fixed dollar limits for bereavement gifts because individual circumstances vary. However, we note that bereavement gifts generally are perishable and intended to comfort the recipient or the recipient’s family during their time of mourning, and we caution that bereavement gifts beyond what is reasonable and customary would be deemed to be gifts in relation to the business of the employer of the recipient and subject to the $100 limit of Rule 3060.2

Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the FINRA Board of Governors. This letter responds only to the issues you have raised in your letter, and does not address any other rule or interpretation of FINRA, or all the possible regulatory and legal issues involved.

Sincerely,

Gary L. Goldsholle
Vice President and Associate General Counsel

cc: Marc Menchel, Executive Vice President and General Counsel



1 See, generally, NASD Notice to Members 06-69.

2 In addition, firms or associated persons making charitable contributions in memory of the deceased should ensure that they comply with the guidance on charitable contributions issued by FINRA in NASD Notice to Members 06-21.