The industry also complained that the $50 exemption to cover small gifts would, in practice, have little benefit. That’s because the proposal would require firms to track the total value of gifts given to a particular recipient. The aggregation requirement would force them to record gifts of nominal value even below the $50 threshold.
Additionally, Finra wants to incorporate current guidance that allows product sponsors to pay for legitimate training expenses for reps—as long as the location is appropriate—and to pay for meals if training sessions cover “substantially all of the work day.”
SIFMA wants Finra to remove the full workday requirement for meals, and allow reimbursement for training at national meetings, which may not meet the current location requirements.
“We question whether the vicinity conditions provide any meaningful investor protections in practice,” SIFMA said in a comment letter.
Finra is proposing to keep its requirement that a training location be in the U.S., and at or near an office of a product sponsor or B-D.
Finally, Finra wants a separate rule covering business entertainment. Currently, business entertainment is covered under the gifts rule, which allows the occasional meal or sporting event provided that it is “neither so frequent nor so extensive as to raise any question of propriety.”
The new entertainment rule would let firms create their own policies. B-Ds would have to define permissible expenses, supervise for improper quid pro quos, and ensure that entertainment was not preconditioned on a sales target.
Industry groups are happy with the principles-based approach Finra took with the entertainment rule, but SIFMA objected to what it said could be burdensome requirements to track “every dollar of business entertainment.” The trade group urged Finra to incorporate a de minimis amount in the entertainment rule, similar to the $50 gifts rule.
A Finra spokesman said the regulator is reviewing the comments and has no estimate of when final rules might be filed with the SEC.
“What they actually send up and propose to the SEC may be different than what they propose now,” said Beck, who expects that Finra might add an automatic inflation adjustment to the $50 threshold gift amount.