3220. Influencing or Rewarding Employees of Others

• • • Supplementary Material: ------------------

.01  Gifts Incidental to Business Entertainment.  A gift given during the course of a business entertainment event is subject to this Rule unless it is consistent with the requirements of Supplementary Material .04 or .06 of this Rule.

.02  Valuation of Gifts.  Gifts must be valued at cost, exclusive of tax and delivery charges, except when valuing tickets for sporting or other events, for which a member must use the higher of cost or face value.  If gifts are given to multiple recipients, members must record the names of each recipient and calculate and record the value of the gift on a pro rata per recipient basis, for purposes of ensuring compliance with the $300 limit in paragraph (a) of this Rule.

.03  Aggregation of Gifts.  Members must aggregate all gifts given by the member and each associated person of the member to a particular recipient over the course of the year for purposes of ensuring compliance with the $300 limit in paragraph (a) of this Rule.  In addition, each member must state in its procedures whether it is aggregating all gifts given by the member and its associated persons on a calendar year, fiscal year, or on a rolling basis beginning with the first gift to any particular recipient.  The aggregation requirements of this Supplementary Material do not apply to gifts that are consistent with the requirements of Supplementary Material .04 or .06 of this Rule.

.04  Personal Gifts.  Gifts that are given for infrequent life events (e.g., a wedding gift or a congratulatory gift for the birth of a child) are not subject to the restrictions in paragraph (a) of this Rule or the recordkeeping requirements in paragraph (c) of this Rule, provided the gifts are customary and reasonable, personal in nature and not in relation to the business of the employer of the recipient.  In determining whether a gift is “personal in nature and not in relation to the business of the employer of the recipient,” members should consider a number of factors, including the nature of any pre-existing personal or family relationship between the person giving the gift and the recipient and whether the associated person paid for the gift.  When the member bears the cost of the gift, either directly or by reimbursing an associated person, FINRA presumes that such gift is not personal in nature and instead is in relation to the business of the employer of the recipient.

.05  Bereavement Gifts.  Bereavement gifts that are customary and reasonable are not considered to be in relation to the business of the employer of the recipient and, therefore, are not subject to the restrictions in paragraph (a) of this Rule or the recordkeeping requirements in paragraph (c) of this Rule.

.06  De Minimis Gifts and Promotional or Commemorative Items

.07  Donations Due to Federally Declared Major Disasters.  Donations by a member or an associated person to any person, principal, proprietor, employee, agent or representative of another person to provide assistance to the individual for losses sustained in a natural event that the President has declared to be a major disaster, such as a wildfire, hurricane, tornado, earthquake, or flood, are not considered “in relation to the business of the employer of the recipient” for purposes of Rule 3220(a).  Such donations are not subject to the restrictions in paragraph (a) of this Rule or the recordkeeping requirements in paragraph (c) of this Rule.

.08  Supervision and Recordkeeping.  Rule 3110 requires a member to have a supervisory system reasonably designed to achieve compliance with Rule 3220.  To meet these standards, members are required to have systems and procedures reasonably designed to ensure that payments and gratuities in relation to the business of the employer of the recipient given by the member and its associated persons to employees of another person are: (a) reported to the member; (b) reviewed for compliance with this Rule; and (c) maintained in the member’s records.  Such procedures must be reasonably designed to ensure that an associated person who is giving a payment or gratuity is not responsible for determining whether such payment or gratuity is in relation to the business of the recipient’s employer.  Members are not required to maintain records of gifts that are consistent with the requirements of Supplementary Material .04 through .07 of this Rule.

.09  Gifts to a Member’s Associated Persons or Individual Retail Customers.  This Rule does not apply to gifts from a member to its own associated persons, or to gifts from a member or an associated person to individual retail customers.