Executive Summary
On February 12, 2026, the Securities and Exchange Commission (SEC) approved the Financial Regulatory Authority’s (FINRA) long-awaited amendments to Rule 3220 (Influencing or Rewarding Employees of Others), commonly known as the “Gifts Rule.” The amendments raise the annual gift limit from $100 to $300 per recipient, codify decades of interpretive guidance, grant FINRA express exemptive authority, and harmonize gift limits across related non-cash compensation rules.
For broker-dealers, this is more than an inflation adjustment. The amendments clarify expectations for valuation, aggregation, supervision, and recordkeeping, and will require firms to revisit their written supervisory procedures (WSPs), training programs, and gift-tracking systems. Senior management should view this as an opportunity to strengthen controls before examiners recalibrate their focus under the revised framework.
Why the Gift Limit Increased, And Why It Matters
The $100 annual gift limit had not been adjusted since 1992. FINRA initially proposed raising the cap to $250, but after public comment and inflation analysis, it amended the proposal to $300 to account for historical inflation and approximately ten years of projected future inflation. The Commission concluded that increasing the threshold better reflects current purchasing power while preserving the rule’s core purpose: preventing conflicts of interest and improper incentives.
From a governance perspective, firms should resist viewing this solely as “more room to give.” Examiners will likely assess whether firms treat the higher threshold as a ceiling rather than a target. The rule continues to prohibit giving “anything of value” that exceeds the annual limit when the gift relates to the business of the recipient’s employer. The regulatory focus remains on influence, not inflation. Senior management should also recognize that raising the threshold does not reduce reputational or Regulation Best Interest-related risks. A $295 gift to a vendor employee may now be technically permissible, but patterns of conduct, aggregation issues, and optics remain supervisory concerns.
Codification of Guidance: Clarity with Consequences
Perhaps more significant than the dollar increase is FINRA’s decision to codify longstanding interpretive guidance into formal supplementary material. This transition from guidance to rule text has practical implications. What firms previously relied on through Notices to Members, FAQs, and interpretive letters is now embedded in enforceable rule language. Importantly, FINRA also codified longstanding interpretive guidance clarifying that Rule 3220 does not apply to gifts from a member to its associated persons or to gifts from a member or its associated persons to individual retail customers. Rule 3220 was designed to address potential commercial bribery involving employees of other entities, not client relationship expenses or internal employee recognition. Nevertheless, gifts to retail customers remain subject to Regulation Best Interest, FINRA Rule 2010, books-and-records obligations, and internal supervisory controls. That said, the following areas are now expressly codified:
- Valuation of Gifts. The rule now specifies that most gifts must be valued at cost, excluding tax and delivery charges, thereby eliminating the prior “higher of cost or market value” standard. However, tickets to sports or entertainment events must be valued at the higher of cost or face value, consistent with common secondary-market pricing practices. In addition, where a gift is provided to multiple recipients, members must record the names of each recipient and calculate and record the gift’s value on a pro rata, per-recipient basis to comply with the $300 annual limit.
- Aggregation Requirements. Firms must aggregate all gifts provided by the member and its associated persons to a single recipient during the applicable annual period. The firm’s WSPs must expressly state whether aggregation is measured on a calendar-year, fiscal-year, or rolling basis, and systems must be reasonably designed to capture firm-wide activity.
- Personal Gifts for Infrequent Life Events. Customary and reasonable gifts for infrequent life events, such as weddings or births, are excluded from the gift limit if they are personal in nature and not related to the business of the recipient’s employer. The rule codifies the presumption that gifts reimbursed by the firm are generally considered business-related, reinforcing the need for objective supervisory review.
- Bereavement Gifts. Reasonable and customary bereavement gifts are expressly excluded from both the annual gift cap and the recordkeeping requirements, recognizing that such gestures are not typically business inducements. This clarification resolves prior ambiguity and aligns the rule with long-standing interpretive positions.
- De Minimis and Promotional Items. Items of de minimis value, such as modest desk items or promotional items bearing a firm’s logo, are excluded from the rule if their value is “substantially below” the $300 threshold. Although the rule does not establish a bright-line test, it preserves supervisory discretion while reinforcing that these items cannot approach the annual cap.
- Commemorative Items. Purely decorative items commemorating a business transaction, such as Lucite tombstones or plaques, are excluded from the gift limit even if their cost exceeds $300, provided they are purely decorative. However, if an item has utilitarian value, it may fall within the rule’s restrictions.
- Disaster-Related Donations. Donations made to assist individuals affected by federally declared major disasters are excluded from the rule because such contributions are humanitarian in nature and not business inducements. These donations are not subject to the gift cap or the recordkeeping requirements under Rule 3220.
- Supervisory and Recordkeeping Obligations. The rule formally incorporates the expectation that firms maintain supervisory systems reasonably designed to ensure that gifts are reported, reviewed for compliance (including aggregation), and properly recorded pursuant to Exchange Act Rule 17a-4. It also clarifies that associated persons may not be solely responsible for determining whether a gift is business-related, thereby reinforcing compliance oversight.
This codification reduces ambiguity but increases enforceability. What was previously FAQ or Notice guidance is now embedded directly in the rule. Thus, from a compliance management perspective, codification elevates these interpretive standards from “guidance you should follow” to “rule language you must follow.” The compliance takeaway is that firms must align internal gift logs, expense coding systems, and supervisory reviews with the new codified standards. Informal interpretations will no longer suffice.
Business Entertainment vs. Gifts: A Continuing Area of Examination Risk
Importantly, Rule 3220 continues to distinguish between a “gift” and an ordinary and usual business expense. The rule does not apply to expenses for bona fide business entertainment, such as meals, sporting events, or other hospitality, provided that the expense is reasonable, not so frequent or extensive as to raise questions of propriety, and, critically, that a registered representative or other employee of the member attends the event.
Where no firm representative attends, however, the expense may be treated as a gift and therefore subject to the $300 annual limit and aggregation requirements. This distinction remains one of the most common sources of confusion in examinations. Firms should ensure that expense policies, reimbursement systems, and supervisory reviews clearly document attendance and business purpose. An otherwise permissible entertainment expense can quickly become a rule violation if it amounts to an effective “ticket drop” or an unattended hospitality arrangement.
From a compliance perspective, the amended rule’s emphasis on valuation and aggregation underscores the importance of properly classifying business entertainment at the outset. Firms that fail to distinguish between attended business entertainment and unattended gifts risk exceeding the annual limit and failing to aggregate properly across the firm.
The amendments reinforce that Rule 3110’s supervisory obligations apply directly to compliance with the gifts rule. Firms must maintain systems reasonably designed to ensure:
- Gifts are reported to the firm;
- Gifts are reviewed for compliance, including aggregation, and
- Records are maintained in accordance with Exchange Act Rule 17a-4.
Importantly, the rule specifies that associated persons giving a gift may not be responsible for determining whether the gift is “in relation to the business” of the recipient’s employer. This reinforces the expectation of objective supervisory review. In practice, this means that compliance, not the registered representative, must control classification decisions for personal, de minimis, or business-related gifts. Firms that rely solely on registered representative attestations without structured review processes may be subject to scrutiny.
Exemptive Authority: Flexibility with Standards
New Rule 3220(d) grants FINRA authority to provide conditional or unconditional exemptions for good cause shown under the Rule 9600 Series process. While this adds flexibility, firms should not assume routine relief. The standard requires consistency with investor protection and the public interest. Firms considering unusual gifting arrangements, international hospitality structures, or novel business models should consult counsel before pursuing exemptive applications.
Conforming Changes to Non-Cash Compensation Rules
The amendments also raise the gift limits from $100 to $300 under FINRA’s non-cash compensation rules applicable to direct participation programs, variable contracts, investment company securities, and underwriting arrangements. This harmonization is operationally helpful but heightens supervisory expectations in product-distribution contexts. Firms must ensure that compensation committees and product due diligence teams coordinate with compliance to align non-cash compensation controls.
Firms should also note that the amendments to Rule 3220 do not alter or preempt other regulatory gift restrictions. Employee Retirement Income Security Act of 1974 (“ERISA”) fiduciary standards and prohibited transaction rules remain unchanged, as do the limitations under MSRB Rule G-20 applicable to municipal securities professionals. In addition, members should consider gift limits and pay-to-play restrictions imposed by other regulatory agencies, states, municipalities, and public entities. Many state and local governments maintain regulations that restrict broker-dealers and other firms from soliciting public business by providing gifts or gratuities to certain government officials and employees.
Practical Takeaways for Broker-Dealer Leadership and Compliance
Senior management and compliance officers should consider:
- Updating WSPs to reflect new thresholds and codified standards.
- Recalibrating gift-tracking systems and expense coding.
- Retraining associated persons on aggregation and reporting.
- Reviewing business entertainment practices for embedded gift components.
- Testing supervisory objectivity in classification decisions.
Regulators will expect prompt implementation and evidence of structured oversight, not simply reliance on the increased dollar cap.
Conclusion: Modernization With Accountability
The SEC’s approval of FINRA Rule 3220 amendments modernizes a rule that had not materially changed in over three decades. But modernization does not mean deregulation. Instead, the amendments provide clearer guardrails, enhanced supervisory expectations, and formalized interpretive standards. Firms that proactively adjust policies, systems, and training will be best positioned for upcoming examination cycles.