3.2.3. Limitations on Gifts, Gratuities, and Non-cash Compensation
MSRB Rule G-20 prohibits municipal securities dealers and municipal advisors from giving gifts worth more than $100 if the gift is given in relation to municipal securities activities and municipal advisory activities.
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 representative 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 firm’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 firm 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 advisor passes that watch along to a client, that gift exceeds the $100 limit, even though the firm did not pay for it.
However, when determining the value of sporting or other tickets, the firm 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 a securities offering. This does not include ordinary and reasonable expenses for meals hosted by the dealer or municipal advisor, or expenses directly related to the offering for which the regulated en