The National Association of Securities Dealers (NASD) recently issued Notice to Members 06-69. The Notice is intended, along with Proposed Interpretive Material-3060 regarding business entertainment, to provide further guidance to member firms in ensuring their systems and procedures enable compliance with Rule 3060 (Influencing or Rewarding Employees of Others) governing gifts and gratuities.
While distinguishing between business-related gifts and entertainment, the Notice clarifies that Rule 3060's prohibitions apply to all gifts incidental to business entertainment. However, it does not generally apply to strictly personal gifts when there is a preexisting personal relationship. Commemorative plaques or other "deal toys" are also excluded, provided they are solely decorative. In addition, Rule 3060 does not apply to gifts of de minimis value (e.g. pens, notepads or modest desk ornaments), or promotional items of nominal value, such as those displaying the firm's logo. However, these must be substantially below the $100 limit to qualify for the exclusion.
According to the Notice, gifts should be valued at the higher of cost or market value, and must be aggregated over the course of a year per recipient, or if multiple recipients, on a pro rata per recipient basis. Firms are required to maintain separate recordkeeping of gifts and gratuities and have in place systems and procedures reasonably designed to ensure gifts are reported, reviewed for compliance with Rule 3060 and maintained in the firm's records.
The complete Notice can be found here.