A bank teller, an insurer's wholesaler and a client's trader can all steer securities business. Any payment that reaches one of them gives that person a reason to serve someone other than the customer. These rules tell a principal which payments to approve, which to record and which to stop.
Compensation shapes behavior, so it is a supervisory subject. Under Rule 3110, the Financial Industry Regulatory Authority (FINRA) expects a supervisory system reasonably designed to achieve compliance with every rule below. You supervise compensation practices of the member, its associated persons and other parties in three flows: what the firm pays out, what your people receive from product sponsors and what they give to employees of institutional clients. For each, ask: may this person receive it, does it fit a limit or condition, and is it recorded?
Regulators cannot prove a payment improper without a paper trail. The statute therefore makes your firm's records its evidence of compliance.
Transaction-based compensation is pay that rises with the number or size of trades, the classic sign that someone is doing a broker's job.
Common mistakes
- Ignoring ticket cost above face value. A $250 resale ticket with a $125 face value counts as $250, the higher figure.
- Using the pre-2026 $100 limit. Both the Rule 3220 limit and the Rule 2320(g) gift allowance are now $300.
- Counting tax and delivery. A $200 basket with $36 of tax and shipping is valued at $200.
Bottom line
- Rule 3220 limits gifts to another person's employee, when tied to the employer's business, to $300 per recipient per year (up from $100 on March 30, 2026), aggregated across the firm and all associated persons.
- Value gifts at cost without tax or delivery, tickets at the higher of cost or face value, and shared gifts pro rata with every recipient named.
- Personal, bereavement, de minimis, promotional, commemorative and disaster gifts escape the limit and the record; gifts to your own staff or to individual retail customers fall outside Rule 3220.
- Under Rule 2320(g), reps take variable contract compensation through the member, unless the member agrees to a qualifying direct payment by a non-member company, and never as offeror securities.
Exam shortcut
Work a gift question in order: Retail customers and your own staff end the analysis. Strike excluded categories. Value the rest: tickets at the higher figure, shared gifts pro rata, no tax or shipping. Add every giver at the firm. Reject teller pay that grows when the customer trades, and any Rule 2320 choice that favors one sponsor's product, covers a guest or is conditioned on sales.
The full lesson (about 3,641 words, 24 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B5
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