Question

A broker-dealer wants to give an employee of another firm a gift. This is permitted provided all of the following conditions are met except?

1) the gift or compensation is preapproved by the firm's self-regulatory organization (SRO).
2) the gift or compensation is not conditional on sales.
3) the gift or compensation doesn't exceed the annual $100 limit.
4) the gift or compensation has the employing member firm's prior approval.

Answer 1

In the scenario of a broker-dealer giving a gift, preapproval by a self-regulatory organization (SRO) is not a necessary condition; however, the gift must not be sales-conditioned, must stay within a $100 limit, and requires the employing firm's approval.

Step-by-step explanation:

A broker-dealer is permitted to give an employee of another firm a gift under certain conditions. However, one of the listed conditions is not required for compliance with the regulations surrounding titles and gifts. Specifically, option 1) stating that the gift or compensation is preapproved by the firm's self-regulatory organization (SRO), is not necessary. The conditions that are required include that the gift or compensation must not be conditional on sales, it does not exceed the annual $100 limit, and it has the employing member firm's prior approval. These conditions are mandated to prevent conflicts of interest in the industry which regulates and supervises the sale of securities, along with the brokers, dealers, and bankers who sell them.