FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProfessional Conduct and Ethical ConsiderationsEasy
A registered representative receives a gift from a client for outstanding service. The gift is a vintage fountain pen valued at $150. The firm's policy explicitly states that representatives may not accept gifts valued at more than $100. What is the most appropriate action the representative should take?
- AAccept the gift and keep it, as the client's intention was good.
- BAccept the gift and report it to compliance.
- CPolitely decline the gift and explain the firm's policy.
- DAccept the gift and donate the excess value to charity.
Show answer & explanationAnswer & explanation
Correct answer: C. Politely decline the gift and explain the firm's policy.
FINRA rules and firm policies often set limits on the value of gifts that registered representatives can accept from clients to prevent conflicts of interest or the appearance of impropriety. Exceeding this limit, even with good intentions, is a violation.
Why the other options are wrong
- A. Accepting the gift and keeping it, despite good intentions, is a direct violation of firm policy.
- B. Accepting the gift, even with reporting, is a violation if it exceeds firm policy limits.
- D. Donating the excess value does not rectify the initial acceptance of a gift that exceeds the limit.
Gift Limits
Registered representatives are subject to rules limiting the value of gifts they can accept from clients, typically $100 per person per year, to prevent conflicts of interest.
- FINRA Rule 3220 generally limits gifts to $100 per person per year.
- Firm policies may have stricter limits.
- Exceeding limits can lead to disciplinary action.
Memory trick: Gifts for reps are a no-go if they're too grand, stick to the rules and firm's command.