Interpretive Letter to Charles Wiegert, NFP Securities
March 15, 2001
1250 Capital Texas Highway
Building 2, Suite 600
Austin, TX 78746
Re: Applicability of Rule 3060 to Certain Expense Reimbursements
Dear Mr. Wiegert:
I am responding to your e-mail inquiry of December 19, 2000 concerning the applicability of Rule 3060 to certain payments. Specifically, you ask whether a registered representative may reimburse a client’s airfare, hotel, food or travel expenses incurred by the client to attend a business meeting with the registered representative to discuss the client’s estate and financial planning matters. You also ask if a registered representative may reimburse a client, either directly or indirectly, for estate planning fees. You indicate that the firm would maintain separate records of these payments and maintain them as specified by SEC Rule 17a-4.
NASD Rule 3060(a) provides
No member or person associated with a member shall, directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of one hundred dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. (Emphasis added.)
By its terms, Rule 3060(a) applies only to those payments or gratuities that relate to the business of the employer of the recipient of the payment. The rule is intended to protect against improprieties that might arise when a member or associated person gives substantial gifts or monetary payments to certain persons without the knowledge of those persons’ employers.1 During our telephone conversation of February 15, 2001, you confirmed that the payments being made by the registered representative would be made in connection with the financial and estate planning of the client and would not relate to the business of the client’s employer. Under these circumstances, the staff believes that such payments are not subject to the limitations of Rule 3060(a).
I hope that this letter is responsive to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation, Inc. This letter responds only to the issues you have raised based on the facts as you have described them, and does not address any other rule or interpretation of the NASD, or all the possible regulatory and legal issues involved.
Sarah J. Williams
Assistant General Counsel
Bernerd Young, Director
1 See Notice to Members 93-8 (February 1993) announcing SEC approval of an amendment to Article III, Section 10(a) of the NASD Rules of Fair Practice, which section was designated as NASD Rule 3060 in 1996.