Finra proposed increasing to $175 from $100 the amount that a registered representative can spend on an individual per year, and is seeking other updates to its gifts, gratuities and non-cash compensation rules.
"The gift rule is meant to prohibit conflicts of interest so you can't influence a firm to send business in your direction," said Todd Cipperman, founding principal at Cipperman Compliance Services.
The Financial Industry Regulatory Authority Inc. also proposed changes to apply the non-cash compensation restrictions to all securities transactions, not just for sales of mutual funds, variable annuities, direction participation programs and public offerings that the rule applies to currently. These rules limit the way members can accept non-cash compensation for sales.
Additionally, the proposed changes would allow for ordinary and usual business entertainment according to policies and procedures established by the member firms, including those that ensure no quid pro quos and includes defined allowable business entertainment, the brokerage industry self-regulator said.
This approach will be better than following the "amorphous guidelines" that Finra has set up over the years, Mr. Cipperman said.
“All of these changes make sense,” he said. “The $100 gift limit was way too low and should be raised, though $175 seems like an arbitrary number.”
Comments on the proposed changes are due by September 23.
These updates are a result of a Finra rule review that concluded in December 2014 that these directives, as well as those regarding member firms' public communications, needed refreshing.