12.6 Ethics & Professional Conduct
FINRA maintains strict rules against kickbacks, unauthorized borrowing, and conflicts of interest. The $300 gift rule and borrowing exceptions are tested on almost every Series 7 exam.
Key FINRA Exam Takeaways
- Gifts & Gratuities (FINRA Rule 3220): Max $300 per recipient per year (raised from $100 in March 2026) to employees or agents of another person, such as an institutional customer's staff.
- Exceptions to $300 gift limit: Normal business entertainment (dinners, sporting events) where the HOST ACCOMPANIES the guest; personal gifts (wedding, baby) unrelated to business.
- Borrowing from or Lending to Customers (FINRA Rule 3240): Generally prohibited unless customer is an immediate family member, or a financial institution in the business of lending, or personal/business relationship outside the BD with written firm approval.
- Sharing in Customer Accounts (FINRA Rule 2150): Prohibited unless registered rep obtains prior written approval from firm and customer, and shares ONLY in direct proportion to financial capital contributed (exception: immediate family does not require proportional sharing).
Borrowing from Customers (Rule 3240)
No Prior Approval Needed: 1. Customer is immediate family member; 2. Customer is a bank in the lending business. Prior Written Firm Approval Mandatory: 1. Customer is another registered person at the firm; 2. Personal relationship outside the broker-customer relationship; 3. Business relationship outside the firm.
Interactive Knowledge Checkpoint • Section 12.6
A registered representative wishes to give two $200 tickets to an NBA playoff game to a major corporate client. Which of the following conditions allows this gift under FINRA Rule 3220?