6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220)

Investment Company and Variable Contracts Products Principal Series 26

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1 Chapter 1: Registration of the Broker-Dealer and Its Associated Persons

1.1 Broker-Dealer Registration, FINRA Membership, and Firm Filings 1.2 Individual Registration: Forms U4 and U5, Registration Categories, and Exempt Persons 1.3 Pre-Hire Screening, Fingerprinting, and Statutory Disqualification 1.4 Heightened Supervision, Interim Plans, and the Taping Rule 1.5 Broker-Dealers, Investment Advisers, Dual Registrants, and Unregistered Entities

2 Chapter 2: Training, Continuing Education, and Product Knowledge

2.1 Continuing Education (Rule 1240), the Maintaining Qualifications Program, and the Annual Compliance Meeting 2.2 The Investment Company Act of 1940: Classifications, Registration, and Fund Governance 2.3 Mutual Fund Pricing, Redemption, Exchanges, Sales Charges, and Share Classes 2.4 Variable Annuities and Variable Life Insurance: Structure, Charges, and Rule 2320 2.5 Closed-End and Interval Funds, UITs, Money Market Funds, 529 Plans, and Investment Risks

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4 Chapter 4: Communications with the Public

4.1 Communications Categories, Principal Approval, Filing, and Recordkeeping (Rule 2210) 4.2 Content Standards, Investment Company Advertising, and Professional Designations 4.3 Variable Contract Communications, Fund Rankings, Bond Fund Volatility Ratings, and Investment Analysis Tools 4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

5 Chapter 5: Recommendations, Customer Accounts, and Product Sales Supervision

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6 Chapter 6: Compensation, Outside Activities, and Personal Conduct

6.1 Cash Compensation, Distribution Arrangements, and Conflicts 6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220) 6.3 Training Meetings, Sales Contests, and Non-Cash Compensation 6.4 Referral Payments, Bank Networking, and Unregistered Persons 6.5 Outside Business Activities, Private Securities Transactions, and Rule 3290 Transition 6.6 Outside Accounts, Borrowing and Lending, Account Sharing, and Guarantees

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8 Chapter 8: Anti-Money Laundering, Customer Identification, and Sanctions

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9 Chapter 9: Supervisory Controls, Business Continuity, and Regulatory Reporting

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6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220)

Key Takeaways Explain This Topic AI

Effective March 30, 2026, Rule 3220 generally limits business-related gifts to $300 per recipient per calendar year, aggregated across the member.

The amended rule contains conditions and exclusions for personal gifts, de minimis promotional items, bereavement gifts, and gifts of negligible value.

Hosted business entertainment is analyzed separately from gifts, but it must be ordinary and usual, attended by the host, and neither so frequent nor so extensive as to raise a propriety concern.

Firms need records and supervisory controls that aggregate value by recipient and distinguish gifts from entertainment based on facts, not expense labels.

Last updated: September 2026

Current Rule and Purpose

FINRA Rule 3220 limits gifts or gratuities given in relation to the business of the recipient's employer. For gifts given on or after March 30, 2026, the general limit is $300 per recipient per calendar year. The amount is aggregated across the entire member firm; representatives cannot each use a separate limit for the same recipient. A principal therefore needs a central view of gifts, including items paid through an expense account or given by a business unit.

The rule addresses improper influence, not customer suitability. A gift can violate Rule 3220 even if no sale occurs, and a gift below the ceiling can still be problematic if it is a bribe, quid pro quo, books-and-records violation, or evidence of a broader conflict.

Valuation, Aggregation, and Exclusions

The firm should record the donor, recipient, recipient's employer, business purpose, date, item, value and treatment. Multiple items to one person are aggregated during the calendar year. Tickets delivered without the host attending are ordinarily treated as a gift rather than entertainment, so the value of the tickets counts toward the limit.

The amended rule and its supplementary material recognize exclusions subject to their conditions, including certain gifts based on a family or personal relationship, bereavement gifts, de minimis or promotional items, and customary commemorative items. An exclusion is not automatic merely because the expense report says "personal." The firm should document the relationship or event, confirm that business considerations did not determine the gift, and apply its procedures consistently.

Business Entertainment

Reasonable meals, sporting events, theater and similar hosted events may be treated as business entertainment instead of gifts when the host attends and the activity is ordinary and usual in the course of business. Entertainment must not be so frequent or so extensive as to raise questions of propriety. Lavish travel, repeated premium events, cash equivalents, entertainment with no meaningful host participation, or expenses for unrelated guests deserve escalation.

Fact pattern Likely treatment

Representative attends a reasonable business meal with the recipient Business entertainment, subject to frequency and propriety controls

• Representative sends event tickets but does not attend Gift; aggregate value for that recipient
• Modest logo item with negligible value Potential exclusion if all conditions are met

Wedding gift based on a genuine personal relationship and paid personally Potential personal-gift exclusion if unrelated to business

• Gift card or cash equivalent Heightened concern; apply the rule and firm prohibition carefully
• Principal Controls

Procedures should establish pre-clearance where risk warrants it, define valuation methods, capture gifts paid personally and later reimbursed, and require prompt entry into a centralized log. Automated warnings can identify a recipient nearing the annual limit. Review expense descriptions against receipts, calendars and attendee lists because misclassified tickets and split expenses are common evasion methods.

The principal should also compare gifts and entertainment with sales, vendor selection and plan-sponsor decisions. A technically within-limit item can be evidence that a representative put an incentive ahead of a customer or attempted to influence an employee. Suspected concealment calls for a wider review of communications, reimbursement channels and other recipients.

Examples and Escalation

Suppose a wholesaler sends a representative a $225 basket and later sends a $100 holiday item in 2026. The firm aggregates both for that recipient; describing one as promotional does not establish an exclusion. If the second item does not qualify for an exclusion, the total exceeds $300. A genuine de minimis logo item is evaluated under the amended supplementary material, not assigned an arbitrary zero value.

For entertainment, the reviewer considers total cost, venue, business purpose, host participation, frequency, guests and relationship to pending business. A reasonable meal after a due-diligence meeting differs from repeated luxury travel. The firm may adopt an internal limit below Rule 3220 and may prohibit categories such as cash equivalents.

Suspected evasion should be reviewed across corporate cards, personal reimbursement requests, wholesaler records and related recipients. Corrective action can include reimbursement, return of the item, discipline, updated logs and testing of other representatives. Returning a prohibited gift does not erase a concealment or books-and-records problem.

A quarterly review should compare recipient totals across legal entities and cost centers. Mergers, shared expense systems and representatives who move between branches can fragment the record. The compliance owner should resolve duplicate recipient identities before relying on an automated limit alert.