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FINRA Issues FAQ on Virtual Business Entertainment

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The Financial Industry Regulatory Authority has just released updated guidance regarding interactive virtual business entertainment events or meetings as it relates to FINRA’s gifts and noncash compensation rules.

The new FAQ directly addresses virtual meetings and entertainment events. Previous guidance issued by FINRA addressed only in-person meetings.

The FAQ addresses the permissibility of providing food and beverage to clients as part of a virtual business meeting or entertainment event as it relates to Rules 3220 (Influencing or Rewarding Employees of Others) and the noncash compensation provisions of FINRA Rules 2310, 2320, 2341 and 5110.

FINRA was asked: Would it be consistent with FINRA rules “for an associated person to host a virtual business entertainment event or a video meeting with the employees of an institutional customer or third-party broker-dealer and provide food and beverage that is designed to be consumed during that event or meeting?”

FINRA’s Answer: “The provisions permitting business entertainment do not specify whether the entertainment must be in-person. Nevertheless, a key distinction between gifts and business entertainment is that the latter involves an associated person of a member personally hosting employees of institutional customers or third-party broker-dealers and their guests, rather than simply giving those employees something of value. Accordingly, where a member firm’s associated persons personally host an interactive virtual business entertainment event or meeting, FINRA would view the associated persons’ provision of reasonable amounts of food and beverage designed to be consumed by the recipient employees and their guests during that virtual business entertainment or meeting as not being subject to the $100 gift limit, provided that the cost of the food and beverage as well as the frequency with which it is provided do not raise questions of propriety.”

Also, FINRA states, providing food and beverage “must not be preconditioned on achieving a sales target.”

As hosts, “the associated persons who send the food and beverage should control who can participate in the meeting, interact with each participant during the meeting, and remain present and visible throughout the meeting, which may be part of a larger video setting involving entertainment,” FINRA explains.

The member firm or its associated persons also “should not provide any other cash or noncash compensation (such as gift cards or other non-food items) to the recipient employees or their guests.”

— Check out FINRA May Modify Rulebook, Supervision in Light of Virus on ThinkAdvisor.