On November 3, 2025, the Financial Industry Regulatory Authority (“FINRA”) announced a $10 million sanction against a brokerage firm for alleged violations of its gifts, non-cash compensation, and entertainment rules. According to FINRA, firm representatives provided excessive gifts and entertainment to brokerage firm personnel and created inaccurate and misleading internal records to hide the misconduct. See FINRA Press Release; FINRA Acceptance, Waiver and Consent (No. 2020066123602). The brokerage firm agreed to the monetary sanction, a censure, and three years of compliance certifications without admitting or denying FINRA’s findings.
FINRA Rule 2341 generally limits gifts to $100 per person per year (though FINRA recently proposed an increase to $300) and permits only occasional, non-sales conditioned business meals or entertainment. FINRA found that the firm’s practices exceeded these limits in a manner that risked compromising the rule’s investor protection objectives. Firm representatives allegedly provided brokers with courtside NBA tickets, luxury concert and sporting event outings (including more than $31,000 in tickets to one broker over 18 months), Broadway tickets, and expensive meals and drinks. In one instance, a wholesaler allegedly offered playoff hockey tickets conditioned upon $1 million in sales of brokerage products. FINRA further determined that the brokerage firm’s internal records understated the scope of the spending, including by attributing event attendance to deceased individuals. FINRA concluded that more than $500,000 in gifts and entertainment was omitted from compliance reports and characterized these issues as indicative of a breakdown in compliance culture.
The penalty demonstrates that FINRA will not hesitate to pursue aggressively potentially serious violations. Broker-dealers, distributors, and asset managers should expect rigorous scrutiny of gifts, meals, entertainment, and related supervisory practices. Robust supervisory oversight, coupled with timely efforts to make prompt remediation and credible certifications, can mitigate exposure when regulators assess penalties.
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