Limitations on Gifts, Gratuities, and Non-Cash Compensation
MSRB Rule G-20 prohibits broker-dealers from giving gifts worth more than $100 if the gift is given in relation to municipal securities activities. In 2016 this rule was amended to include municipal advisors and their associated persons.
There are a few exceptions to the rule, provided that they do not give rise to any apparent or actual material conflict of interest. These include:
• Occasional gifts of meals or tickets to the theatre or sporting events if the municipal advisor accompanies the client
• Legitimate business functions recognized by the IRS as deductible business expenses
• Promotional gifts of nominal value (must be well below the $100 limit) that bear the municipal advisor’s logo
• Gifts that commemorate a transaction, for example, a customary plaque or Lucite tombstone given upon closing
• Gifts of negligible value, like pens and notepads
• Personal gifts given on special, infrequent occasions, like weddings, the birth of a child, or funerals (rep must have a personal relationship with the person and the firm must not pay for the gift)
When determining the value of the gift, the municipal advisor generally must take the higher of the cost or the market value. This means that if a municipal advisor is given a watch that is worth $200 and the municipal advisor passes that watch along to a client, that gift exceeds the $100 limit, even though the municipal advisor did not pay for it.
However, when determining the value of sporting or other tickets, the municipal advisor must take the higher of the cost or face value.
The MSRB now prohibits municipal securities dealers and municipal advisors from seeking reimbursement for entertainment expenses related to entertaining a municipal official from the proceeds of an offering of securities. This does not include ordinary and reasonable expenses for meals hosted by the dealer or municipal advis