Overview
The Financial Industry Regulatory Authority (“FINRA”) has requested comments on a proposed amendment (the “Amendment”) to Rule 3220 (“Rule 3220”) that it recently filed with the Securities and Exchange Commission to modernize FINRA’s longstanding prohibition on member firms and their associated persons offering gifts or gratuities exceeding a specified amount to employees of other firms when such gifts are given in connection with the business of the recipient’s employer. A key purpose of the Rule has been to mitigate the use of undue influence in client relationships; however, member firms have long maintained that the existing monetary limits, which have been in place since 1992, were too low and that the related guidance lacked clarity. The proposed Amendment appears to address these concerns, as summarized below.
Gift Limit Raised
The centerpiece of this proposed Amendment includes an increase in the gift limit from the current $100 per person, per year to $250. This adjustment is intended to reflect the impact of inflation over the past three decades and to better align the limit with the current business environment. FINRA also indicated it plans to review this limit periodically going forward to ensure it remains appropriate over time.
Codification of Existing Guidance
The proposed Amendment also integrates into the Rule, via new sections, a range of interpretive positions and guidance that have been informally issued over the years. Specifically, the amended rule would formally clarify how gifts are valued, aggregated, and supervised, and it would more clearly distinguish between business gifts that fall under the rule and other items that do not.
- Incidental Business Gifts (3220.01). Items given during business entertainment and events, such as door prizes or gift baskets, would count toward the annual limit.
- De Minimis/Promotional Items (3220.05). Low-value or commemorative items such as branded pens, mugs, notepads, or apparel featuring the firm’s logo, commemorative trophies or plaques recognizing a business relationship or milestone, or other inexpensive items that are intended to advertise the firm or serve as a keepsake rather than as personal compensation or inducement are exempt from Rule 3220 if they meet defined thresholds.
- Valuation (3220.02). The questions about how to assign a dollar value to a wide variety of gifts, from tangible items like electronics to more complex items like event tickets or shared gifts at corporate functions, have been problematic for member firms. The Amendment codifies a straightforward approach based on the higher of actual cost or the market value (or for gifts other than event tickets, which would be valued at its face price). Additionally, the Amendment addresses the pro rata allocation for a shared gift given jointly to multiple recipients. In those situations, the total value must be allocated proportionately among all recipients for purposes of the gift limit.
- Aggregation (3220.03). The Amendment would also expressly permit firms to choose whether to aggregate gifts on a calendar-year, fiscal-year, or rolling 12-month basis, provided they apply this approach consistently.
- Personal Gifts (3220.04). Private personal gifts, such as wedding gifts, baby showers and sympathy gifts for a family bereavement or medical situation remain exempt from Rule 3220, provided the gift is given in a personal capacity and not in given relation to the business of the employer of the recipient. An important issue here is that should the member reimburse its employee for a personal gift, the gift loses its personal nature, and it becomes a gift for purposes of the Rule. Accordingly, only individuals can rely on the exemption with respect to personal gifts, member firm themselves cannot.
- Disaster-Related Donations (3220.06). Additionally, charitable donations supporting employees after federally declared disasters are not viewed as business-related and are exempt.
Exemptive Relief
One of the notable enhancements under FINRA’s proposed amendment to Rule 3220 is the introduction of a formal exemptive relief mechanism. Under the proposed amendment, FINRA would be empowered to grant exemptions from the rule’s requirements when a member firm can demonstrate “good cause shown” and when FINRA determines that such an exemption would be consistent with investor protection and the public interest. This authority would allow FINRA to respond to unique situations that might justify a deviation from the otherwise rigid dollar cap. Examples of scenarios included might include:
- Special Circumstances or Cultural Contexts: Certain international or cross-border business relationships may involve customary practices that exceed the limit but do not present the risk of improper influence.
- Extraordinary Events: An unusual occurrence, such as a significant milestone or recognized achievement in the industry, might warrant a firm offering a gift above the limit to honor an individual’s contribution, without risking a conflict of interest.
- Firm-Specific Compliance Frameworks: A member firm with robust controls and demonstrable safeguards could request a narrowly tailored waiver for certain relationships or transactions.
Importantly, any exemption request would be reviewed through FINRA’s established Rule 9600 Series process, which provides a formal procedure for submitting and evaluating such applications. This process would promote transparency, consistency, and documentation of FINRA’s reasoning in granting or denying relief.
Comment Period
Because the Amendment introduces significant changes to Rule 3220, FINRA is actively soliciting comments on the proposed revisions. Member firms are encouraged to submit their feedback before the deadline of July 8, 2025. Comments may be submitted electronically by [clicking here].