MSRB Rule G-20 limits broker-dealers from giving gifts worth more than $100, if the gift is given in relation to municipal securities activities. Effective May 6, 2016, this rule extends to municipal advisors and their associated persons.
There are a few exceptions to this rule, which 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 that bear the municipal advisor’s logo
• Gifts that commemorate a transaction, for example, a plaque given upon closing
• Gifts of negligible value, like pens
• Personal gifts given on special, infrequent occasions, like weddings or funerals
When determining the value of the gift, the municipal advisor must take the higher of the cost or the market value. This means that if a municipal advisor is given tickets that are worth $200, and the municipal advisor passes those tickets along to a client, that gift exceeds the $100 limit, even though the municipal advisor did not pay for it.
Note: Rule G-20 limits broker-dealers and municipal advisors to gifts of $100 per person, per year. This means that three $50 gifts in a 12-month period will exceed the $100 limit.