Rule 350 Compensation or Gratuities to Employees of Others
This rule interpretation is no longer applicable effective December 15, 2008.
/01 Application
One of the purposes of this Rule is to prohibit member organizations from aiding and abetting fraudulent practices by money managers.
Any establishment of a condition causing the personal interest of an agent or employee of a customer to interfere with his ability to properly represent interests of customers in dealing with a member organization, or any attempt to do so will be interpreted as a violation of Rule 350. Although the Rule specifies certain classes of institutional and broker or dealer customers, the Exchange will interpret Rule 350 when applied in conjunction with Rule 401 (Good Business Practice) as applying to compensation or gratuities to agents and employees of all customers.
One of the purposes of this Rule is to prohibit member organizations from aiding and abetting fraudulent practices by money managers.
Any establishment of a condition causing the personal interest of an agent or employee of a customer to interfere with his ability to properly represent interests of customers in dealing with a member organization, or any attempt to do so will be interpreted as a violation of Rule 350. Although the Rule specifies certain classes of institutional and broker or dealer customers, the Exchange will interpret Rule 350 when applied in conjunction with Rule 401 (Good Business Practice) as applying to compensation or gratuities to agents and employees of all customers.
/02 Conflicts of Interest
Member organizations should be cautious about possible conflicts of interest when clerks and other personnel on the Floor are employed by other member organizations and should maintain effective control over the amounts of brokerage business which their clerks give to Floor brokers, particularly when the clerks receive payments for part time service rendered to Floor brokers. The compensation paid by Floor brokers should be monitored by both employers. The payments should be commensurate with the service rendered. Only business checks should be used for compensation, never cash or personal checks.
Member organizations should be cautious about possible conflicts of interest when clerks and other personnel on the Floor are employed by other member organizations and should maintain effective control over the amounts of brokerage business which their clerks give to Floor brokers, particularly when the clerks receive payments for part time service rendered to Floor brokers. The compensation paid by Floor brokers should be monitored by both employers. The payments should be commensurate with the service rendered. Only business checks should be used for compensation, never cash or personal checks.
/03 Entertainment
Ordinary and usual business entertainment is neither limited nor addressed by the Exchange's Rule and is distinguishable from prohibited gratuities. Entertainment, the "act of entertaining" is also defined as "to treat as a guest" or "to show hospitability to." The Exchange normally will not view business entertainment of the kind defined above to be covered by the Rule 350 prohibition against gratuities where a person associated with the member organization acted as the host.
Where a person associated with the member organization is not personally acting as host, the provision of tickets to theatres or sports events, limousines and like services would be viewed by the Exchange as Rule 350 gratuities. Such gratuities are to be valued at cost for purposes of the Rule, and may not be discounted on the theory that they might not otherwise be used.
Ordinary and usual business entertainment is neither limited nor addressed by the Exchange's Rule and is distinguishable from prohibited gratuities. Entertainment, the "act of entertaining" is also defined as "to treat as a guest" or "to show hospitability to." The Exchange normally will not view business entertainment of the kind defined above to be covered by the Rule 350 prohibition against gratuities where a person associated with the member organization acted as the host.
Where a person associated with the member organization is not personally acting as host, the provision of tickets to theatres or sports events, limousines and like services would be viewed by the Exchange as Rule 350 gratuities. Such gratuities are to be valued at cost for purposes of the Rule, and may not be discounted on the theory that they might not otherwise be used.