Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A registered representative (RR) receives a gift from a client valued at $150 in appreciation for their service. The RR also received a $75 gift from another client and a $25 gift from a third client within the same calendar year. Assuming the broker-dealer's policy aligns with FINRA rules, what action, if any, is required regarding these gifts?
- AThe RR must report all gifts received, as the aggregate value exceeds $100 for the year.
- BThe RR must return the $150 gift as it exceeds the annual per-client limit.
- CNo action is required as all gifts are below the $100 per client limit individually.
- DThe RR must report the $150 gift to their broker-dealer as it exceeds the annual per-client limit.
Show answer & explanationAnswer & explanation
Correct answer: D. The RR must report the $150 gift to their broker-dealer as it exceeds the annual per-client limit.
FINRA Rule 3220 prohibits registered persons from accepting gifts or compensation exceeding $100 per person per year from any one client. The $150 gift from a single client exceeds this limit and must be reported and likely declined or returned.
Why the other options are wrong
- A. The rule applies per client, not as an aggregate across all clients.
- B. While it exceeds the limit, returning it is one option; reporting to the firm for approval/instruction is the immediate required action.
- C. The $100 limit is per client, not per gift, and the $150 gift exceeds this.
FINRA Gift Limit
FINRA Rule 3220 generally prohibits registered persons from accepting gifts or compensation from clients that exceed $100 per person per year.
- Limit is $100 per person per year
- Applies to gifts and gratuities
- Requires firm permission for exceptions
- Designed to prevent conflicts of interest
Memory trick: One-hundred dollar 'FINRA' gifts from 'any-ONE' client.