Business relationships often involve giving gifts and entertaining clients. While this is a normal part of doing business, it comes with risks that need to be managed carefully. Financial companies must follow strict rules about giving gifts, especially those set by FINRA (Financial Industry Regulatory Authority). This guide breaks down these rules in simple terms and explains how companies can stay within the law while maintaining good business relationships.
Understand FINRA’s Role in Gift-Giving Regulation
Think of FINRA as a watchdog for the financial industry. It keeps an eye on more than 600,000 brokers across the country using advanced AI technology to spot any wrongdoing. When it comes to gift-giving, FINRA’s job is to make sure nobody is using gifts to bribe others or create conflicts of interest. This is why gifts and entertainment compliance is so important – it helps prevent both accidental and intentional misuse of business gifts.
The FINRA Gift Rule: Requirements and Limitations
The main rule about gifts in the financial industry is simple: you can’t give more than $100 worth of gifts per year to any one person you do business with. This rule, called FINRA 3270, applies to things like gift cards, event tickets, or any other valuable items given for business reasons. However, if you’re friends with someone outside of work and want to give them a birthday gift, that’s different – personal gifts between friends aren’t covered by this rule.
Define the Boundaries of Business Entertainment
There’s a difference between gifts and business entertainment. Taking a client to dinner or a sports game isn’t counted as a gift if you go along too. FINRA calls this “ordinary and usual business entertainment.” However, there’s a catch – you can’t do this so often that it starts to look suspicious. The key to gifts and entertainment compliance is using common sense: occasional business meals and events are fine, but excessive entertainment isn’t.
Implement Effective Compliance Programs
To stay within the rules, companies need three main things: clear policies about gifts, good training for employees, and a way to track all gifts and entertainment expenses. Modern companies often use special software to help with this tracking. This software can warn them if someone is about to break a rule and keeps records of all gift-giving activities. Regular training helps employees understand what they can and can’t do when it comes to gifts and entertainment.
Remote Work Considerations and Modern Compliance Challenges
With more people working from home, companies have new things to think about when it comes to gifts and entertainment. For example, FINRA has said it’s okay to pay for meals during virtual meetings, and this doesn’t count toward the $100 limit – as long as it doesn’t happen too often. Companies need to keep their gift policies up-to-date to handle these new situations while still following the basic rules.
Conclusion
Companies need to find the sweet spot between building good business relationships and following FINRA’s rules. With clear policies, good training, and careful tracking of gifts and entertainment, companies can maintain strong business relationships while staying within the law. As work habits change, especially with more remote work, companies need to stay flexible and adjust their policies while still following the basic principles of fairness and transparency.
