Notice To Members 93-8

SEC Approval of Amendment Relating To the Payment of Gratuities or Anything Of Value by Members To Others

Published Date:

SUGGESTED ROUTING

Senior Management
Legal & Compliance

Executive Summary

On December 28, 1992, the Securities and Exchange Commission (SEC) approved and made effective an amendment to Article III, Section 10(a) of the Rules of Fair Practice. The amendment raises from $50 to $100 the maximum value of gifts or gratuities a member or associated person may provide to another person each year. The text of the amendment follows this Notice.

Background and Description of The Amendment

The SEC has approved an amendment to Article III, Section 10(a) of the Rules of Fair Practice that raises from $50 to $100 the maximum per person value of gratuities or gifts a member or associated person may provide to another person each year.

Article III, Section 10(a) of the NASD Rules of Fair Practice sets an annual, per person limit on payments of anything of value, including gifts and gratuities, by a member or associated person of a member to another person where the payment relates to the business of the recipient's employer. The rule protects against improprieties that might arise when members or associated persons give substantial gifts or monetary payments to certain persons without their employer's knowledge. The amendment only raises the dollar limit in the rule; it does not change the categories of persons covered by the rule or the other requirements under Section 10 concerning prior written agreements and recordkeeping relating to such compensation for services.

The proposed rule change is consistent with recently approved Rule 350(a) of the New York Stock Exchange (NYSE), which raised to $100 from $50 the amount of a gratuity which a NYSE member may give to another without obtaining prior written consent of the recipient's employer. The NASD's new rule simplifies compliance by member firms that also belong to the NYSE.

Questions concerning this Notice should be directed to Elliott R. Curzon, Senior Attorney, Office of General Counsel, at (202) 7288407.

Amendment to Article III, Section 10 Of the Rules of Fair Practice

(Note: New text is underlined; deleted text is in brackets.)

Influencing or Rewarding Employees of Other

Sec. 10

(a) No member or person associated with a member shall, directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of one hundred [fifty] dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind is considered a gratuity.