NASD Report on Examination Findings Regarding Gifts and Gratuities

As a result of a recent review of gift and gratuity practices of over 40 member firms, NASD staff is concerned that members may not be fulfilling their obligations to comply with, and establish adequate supervisory systems and procedures reasonably designed to achieve compliance with, NASD’s rule governing gifts and gratuities – Conduct Rule 3060 (the “gift rule”).  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.

Rule 3060 also requires members to retain a separate record of all payments or gratuities.  Rule 3010 requires firms to have systems and procedures reasonably designed to achieve compliance with NASD Rules, including Rule 3060. This report details our findings from a review of more than 40 member firms with respect to compliance with the gift rule over a two-year period, and the supervision of firm practices in this area. In light of the findings from this examination, NASD is also issuing Notice to Members 06-69, which provides additional guidance with respect to compliance with Rule 3060.