Chapter 9.4 Flashcards
Influencing or Rewarding Employees or Others
No member shall give or permit to be given anything of value, including gratuities, in excess of $100 per person per year in relation to the business of the employer. This includes gifts of any kind
- This rule does not apply to written contracts of employment or compensation for services rendered, provided there was a written agreement for such service and a written consent of the person’s employer is required
- The $100 limit is the total limit for a year
- The rule prohibits cash and non-cash gifts in excess of $100 per year.
**The rule does not apply to gifts given to individual customers that are not in relation to the business of the B/D.
MSRB Political Contribution Limits
- Contributions cannot exceed $250 per election and the Municipal Finance Professional must be able to vote in the election
- If a violation of rules occurs, the municipal dealer with whom the MFP is associated with is prohibited from engaging in negotiated municipal securities business for 2 years with the issuer that the improper contribution was made to. This rule does not apply to competitively bid deals.
- MFPs are individuals associated with a dealer who are primarily involved in underwriting, sales, and trading
- Contributions by spouses of MFPs are not subject to the rule
Supervision of Registered Representatives changing member firms
FINRA is concerned with conflicts of interests when a RR moves to another member firm. The two main concerns are:
- A customer may own investment products which are not transferable to the new firm. The RR may be inclined to recommend that the customer sell the fund and buy a different fund that is transferable before the RR attempts to move to another firm
- Some member firms have dealer agreements in place with mutual funds or variable annuity companies that permit the member firm to sell these products. If the new member does not have a dealer agreement with the same companies the RR cannot continue selling and servicing these products
FINRA requires that member firms maintain the following written supervisory procedures when it comes to RR’s changing member firms
- The new firm should attempt to learn if the rep offers investment products for which the new firm would need a dealer agreement, and if so whether the new firm will try to attain such agreements
- If the new firm cannot or will not service a customer’s mutual fund or variable product, the new firm or RR must advise the customer of this fact. The firm must also provide the customer with options, such as continue to hold the investment at the prior firm or liquidate the investment. This must occur Before the RR makes any new investment recommendation.
- Heightened supervision - For a reasonable time period following the hiring of a new RR, the new firm must review any recommendations that were made to liquidate investments. The review must determine if the new recommendations were suitable and whether or not the RR was offered special incentives to make such recommendations.
**The new firm needs to know and evaluate the various mutual funds and variable products that the client holds and whether or not the new firm can service these products but does NOT need to know the “client’s objectives” until the account is opened, and does not need to know the size of the accounts.
