# SECURITIES AND EXCHANGE COMMISSION

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

8011-01-P
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105361; File No. SR-MSRB-2026-02]
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change Consisting of Amendments to
MSRB Rule G-20 to Revise the MSRB’s Gift and Gratuities Requirements to Preserve
Alignment with Amendments to FINRA Rule 3220 and to Make Certain Technical
Amendments
May 4, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) 1
and Rule 19b-4 thereunder, 2 notice is hereby given that on May 1, 2026 the Municipal Securities
Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission
(“Commission”) the proposed rule change as described in Items I, II, and III below, which Items
have been prepared by the MSRB. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
I.

Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed
Rule Change
The MSRB filed with the Commission a proposed rule change consisting of amendments

to MSRB Rule G-20, on gifts, gratuities, non-cash compensation and expenses of issuance, to (i)
revise the MSRB’s gift and gratuities requirements for brokers, dealers, and municipal securities
dealers (collectively, “dealers”) and municipal advisors (together with dealers, “regulated

1

15 U.S.C. 78s(b)(1).

2

17 CFR 240.19b-4.

entities”) to preserve alignment with the Financial Industry Regulatory Authority ("FINRA")
amendments to FINRA Rule 3220 3 (“FINRA’s gift rule amendment”), and (ii) make technical
amendments to renumber certain rule provisions under MSRB Rule G-20 to enhance the clarity
of the rule (collectively, the “proposed rule change”).
The MSRB has designated the proposed rule change as constituting a “noncontroversial"
rule change under Section 19(b)(3)(A) 4 of the Exchange Act and Rule 19b-4(f)(6) 5 thereunder,
which renders the proposal effective upon receipt of this filing by the Commission. The
operative date for the proposed rule change would be June 1, 2026, for dealers that are FINRA
members. However, a separate compliance date of December 1, 2026, would apply for all
municipal advisors as well as dealers that are not FINRA members (“bank dealers”) 6 with
respect to the proposed rule change. Until such compliance date for municipal advisors and bank
dealers, such regulated entities would be subject to the existing provisions of MSRB Rule G-20,
including, but not limited to, the gift limit (i.e., $100 limit per person per year) and overarching
supervisory and recordkeeping requirements, as applicable.
The text of the proposed rule change is available on the MSRB’s website at
https://msrb.org/2026-SEC-Filings and at the MSRB’s principal office.
II.

Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change

3

See Exchange Act Release No. 104830 (Feb. 12, 2026), 91 FR 7570 (Feb. 18, 2026), File
No. SR-FINRA-2025-003 (“FINRA Approval Order”), available at
https://www.sec.gov/files/rules/sro/finra/2026/34-104830.pdf.

4

15 U.S.C. 78s(b)(3)(A).

5

17 CFR 240.19b-4(f)(6).

6

A bank dealer is defined under MSRB Rule D-8 as a municipal securities dealer which is
a bank or a separately identifiable department or division of a bank.
2

In its filing with the Commission, the MSRB included statements concerning the purpose
of and basis for the proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of
the most significant aspects of such statements.
A.

Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose

The proposed rule change is intended to more closely harmonize the MSRB’s provisions
relating to the giving of gifts and gratuities in MSRB Rule G-20 to FINRA Rule 3220, as
amended by FINRA’s gift rule amendment, in furtherance of promoting greater efficiency in
complying with MSRB Rule G-20 by clarifying certain regulatory obligations of regulated
entities without reducing the protection of investors and the public interest and at the same time
making them consistent with current FINRA Rule 3220. MSRB Rule G-20 prohibits regulated
entities and their associated persons, in certain circumstances, from giving directly or indirectly
any thing or service of value, including gratuities (hereinafter referred to as “gifts”), in excess of
$100 per year to any person in relation to the municipal securities or municipal advisory
activities of the recipient’s employer. 7 The rule is meant to maintain the integrity of the
municipal securities market, including the bond issuance process, by ensuring the prevention of
improprieties and conflicts of interest that may arise associated with the giving of gifts in relation
to the business of the recipient’s employer. 8

7

MSRB Rule G-20 does not apply to gifts given by a regulated entity to its own employees
or partners.

8

MSRB Rule G-20(a).
3

The MSRB believes the proposed rule change would enhance regulated entities’
understanding of their compliance obligations under MSRB Rule G-20, including by avoiding
regulatory inconsistency in the application of MSRB and FINRA rules with respect to dealers
that are FINRA members. To that end, the MSRB is proposing to amend MSRB Rule G-20,
consistent with FINRA Rule 3220 as amended by FINRA’s gift rule amendment, to (i) increase
the gift limit from $100 to $300 per person per year; (ii) address how gifts incidental to normal
business dealings should be treated; (iii) revise valuation and aggregation requirements; (iv)
codify additional exceptions to which the gift limit and recordkeeping requirements do not apply;
(v) establish additional supervision and recordkeeping requirements; and (vi) clarify that the rule
does not apply to gifts from a regulated entity to its own associated persons or to individual retail
customers. The proposed rule change would also make technical amendments to renumber
certain Supplementary Materials for simplicity and better organization. The amendments are
addressed below.
Background
Current MSRB Rule G-20
The MSRB adopted MSRB Rule G-20 in 1978, 9 alongside several other rules including
the MSRB’s baseline fair practice rule, MSRB Rule G-17, with the purpose to “codify basic
standards of fair and ethical business conduct for municipal securities professionals.” 10
Originally applicable to dealers, MSRB Rule G-20 was amended in 2015 to extend its provisions

9

See Exchange Act Release No. 15247 (Oct. 27, 1978), 43 FR 50526 (Oct. 30, 1978), File
No. SR-MSRB-77-12.

10

See Exchange Act Release No. 14519 (Mar. 2, 1978), 43 FR 9672, 9672 (Mar. 9, 1978),
File No. SR-MSRB-77-12.
4

to municipal advisors. 11 The rule functions to protect against improprieties and conflicts of
interest that may arise when a regulated entity, or its associated persons, attempts to induce
organizations active in the municipal securities market to engage in business with such regulated
entity by means of gifts given to employees of such organizations. However, MSRB Rule G-20
should not be read in isolation from other MSRB fair practice rules, including MSRB Rule G-17.
In pertinent part, MSRB Rule G-20 currently prohibits a regulated entity, 12 and its
associated persons, in certain circumstances, from giving directly or indirectly gifts in excess of
$100 per year to a person other than an employee or partner of the regulated entity. 13 This
prohibition only applies if such gifts are in relation to the municipal securities or municipal
advisory activities of the employer of the recipient of the payment or service. 14 This general
limitation (hereinafter referred to as the “gift limit”), currently set forth in section (c) of MSRB
Rule G-20, has remained fixed at $100 since MSRB Rule G-20 was adopted in 1978. 15
MSRB Rule G-20 currently specifies certain types of gifts that are not subject to the gift
limit, provided that they do not give rise to any apparent or actual material conflict of interest: 16

11

See Exchange Act Release No. 76381 (Nov. 6, 2015), 80 FR 70271 (Nov. 13, 2015), File
No. SR-MSRB-2015-09.

12

See MSRB Rule G-20(b)(vii).

13

MSRB Rule G-20(c).

14

Id. For the purposes of Rule G-20, the definition of the term “employer” includes a
principal for whom the recipient of a payment or service is acting as agent or
representative. Id.

15

See supra note 10, 43 FR at 9673.

16

MSRB Rule G-20(d)(i)–(vi), respectively.
5

(i)

normal business dealings, which include occasional gifts of meals or tickets to
theatrical, sporting, and other entertainments that are hosted by the regulated entity or
its associated persons, 17 and the sponsoring by the regulated entity of legitimate
business functions that are recognized by the Internal Revenue Service as deductible
business expenses, provided that such gifts shall not be so frequent or so extensive as
to raise any question of propriety;

(ii)

transaction-commemorative gifts that are solely decorative items commemorating a
business transaction, such as a customary plaque or desk ornament (e.g., Lucite
tombstone);

(iii)

de minimis gifts, such as pens, notepads or modest desk ornaments;

(iv)

promotional gifts of nominal value displaying the regulated entity’s corporate or other
business logo 18 and that are substantially below the gift limit (considered of nominal
value);

(v)

bereavement gifts that are reasonable and customary for the circumstances; and

(vi)

gifts that are personal in nature given upon infrequent life events (e.g., a wedding gift
or a congratulatory gift for the birth of a child). 19

17

Pursuant to MSRB Rule G-20, if the regulated entity or its associated person(s) failed to
host (i.e., accompany guests) such types of events, then gifts of this kind would be
subject to the gift limit.

18

Under current Supplementary Material .03, on promotional gifts and other business logo,
logos of a product or service being offered by a regulated entity, for or on behalf of a
client or an affiliate of that regulated entity, would constitute an “other business logo”
under subsection (d)(iv).

19

Under current Supplementary Material .04, on personal gifts, the rule, among other
things, exempts personal gifts that are not “in relation to the municipal securities or
municipal advisory activities of the employer of the recipient” from the gift limit. The
Supplementary Material states that, in determining whether a gift is personal in nature, a
6

MSRB Rule G-20 includes Supplementary Material, which provides guidance relating to
the valuation and the aggregation of gifts and to the applicability of state laws. Supplementary
Material .01, on valuations of gifts, currently states that a gift’s value should be determined
generally according to the higher of its cost or market value, and that tickets to a sporting or
other entertainment event should use the higher of cost or face value. Supplementary Material
.02, on aggregations of gifts, currently states that regulated entities must aggregate all gifts that
are subject to the gift limit given by the regulated entity and each associated person of the
regulated entity to a particular recipient over the course of a year. 20
As noted above, MSRB Rule G-20 does not conclusively exempt these categories of gifts
from the gift limit as such gifts must not give rise to any apparent or actual material conflict of
interest, even if they otherwise fully meet the description of an exempt category of gifts,
consistent with a core purpose of the rule to protect against improprieties and conflicts of interest
that may arise when regulated entities or their associated persons give gifts or gratuities in
relation to the municipal securities or municipal advisory activities of the recipients’ employers
under Rule G-20(a). Furthermore, MSRB Rule G-17, on conduct of municipal securities and
municipal advisory activities, applies to the activities of regulated entities, whether or not
another rule may apply to certain aspects of such activities. 21 As such, the MSRB reminds

number of factors will be considered including, but not limited to, the nature of any preexisting personal or family relationship between the associated person giving the gift and
the recipient and whether the associated person or the regulated entity with which he or
she is associated paid for the gift.
20

A “year” is defined by the regulated entity (i.e., calendar year, fiscal year, or rolling basis
beginning with the first gift given to any particular recipient). See Supplementary
Material .02 to MSRB Rule G-20.

21

For example, the MSRB has previously provided guidance regarding payments for
excessive or lavish entertainment expenses that, depending on the specific facts, can
7

regulated entities that MSRB Rule G-17 has long been articulated as a rule that complements the
other rules centered on the protection of investors, municipal entities, obligated persons and the
public interest. Depending on the particular facts and circumstances, a regulated entity may
violate the fundamental fair-dealing obligations of MSRB Rule G-17 if such regulated entity
engages in behavior that would constitute a deceptive, dishonest or unfair practice, whether or
not such behavior also constitutes a violation of MSRB Rule G-20, as amended by this proposed
rule change.
With respect to the applicability of state or other laws, the MSRB notes that regulated
entities and their associated persons may be subject to other duties, restrictions or obligations
under state or other laws and nothing within the rule shall be deemed to supersede any more
restrictive provision of state or other laws in this area. 22
FINRA’s Gift Rule Amendment
FINRA’s gift rule amendment, which was approved by the Commission on February 12,
2026, 23 and became effective March 30, 2026, 24 makes the following revisions to FINRA Rule
3220:
•

raises the dollar amount of FINRA’s gift limit from $100 to $300;

constitute both a violation of MSRB Rule G-20 and MSRB Rule G-17. See MSRB
Interpretation, Dealer Payments in Connection With the Municipal Securities Issuance
Process (Jan. 29, 2007), available at https://www.msrb.org/Dealer-Payments-ConnectionMunicipal-Securities-Issuance-Process.
22

Supplementary Material .05. The MSRB recognizes that the federal government and
many states and localities limit gifts to government officials and their employees.

23

See FINRA Approval Order, supra note 3, 91 FR at 7570.

24

See FINRA Regulatory Notice 26-05 (Feb. 27, 2026), available at
https://www.finra.org/rules-guidance/notices/26-05.
8

•

provides FINRA the authority to grant exemptive relief from the gift limit;

•

codifies certain existing FINRA guidance, including guidance regarding gifts incidental
to business entertainment, valuation of gifts, aggregation of gifts, personal gifts,
bereavement gifts, de minimis gifts and promotional or commemorative items, donations
due to federally declared major disasters; and

•

adopts supervision requirements and additional recordkeeping obligations.

Moreover, FINRA’s gift rule amendment makes conforming changes to the gift limit with
respect to FINRA Rules 2310, 2320, 2341 and 5110, on non-cash compensation. 25
While the MSRB has filed with the Commission this proposed rule change to harmonize
MSRB Rule G-20 with FINRA Rule 3220 as amended by FINRA’s gift rule amendment,
significant portions of MSRB Rule G-20 would be unaffected by FINRA’s gift rule amendment
due to the MSRB’s earlier codification into MSRB Rule G-20 the substance of certain FINRA
interpretations that FINRA had not yet incorporated into FINRA Rule 3220 until FINRA’s gift
rule amendment. 26 The MSRB notes that, although FINRA’s gift rule amendment provides
authority for FINRA to grant exemptive relief to FINRA Rule 3220, the proposed rule change
would not harmonize or align with FINRA through the inclusion of corresponding provisions, for
the reasons stated below. The proposed rule change would align and harmonize both the

25

See FINRA Approval Order, supra note 3, 91 FR at 7571. FINRA’s non-cash
compensation provisions are codified as separate rules, while the MSRB’s non-cash
compensation provisions are codified within MSRB Rule G-20 (subsections G-20(g)(i)–
(v)).

26

See Exchange Act Release No. 52555 (Oct. 3, 2005), 70 FR 59106 (Oct. 11, 2005), File
No. SR-MSRB-2005-02; Exchange Act Release No. 76381 (Nov. 6, 2015), 80 FR 70271
(Nov. 13, 2015), File No. SR-MSRB-2015-09.
9

substantive requirements, as appropriate, and the text and organization with FINRA’s gift rule
amendment where doing so does not negatively impact the clarity of MSRB Rule G-20.
Description of Proposed Rule Change
Increase in Dollar Amount of Gift Limit
FINRA Rule 3220(a) prohibits a FINRA member or person associated with a FINRA
member from giving anything of value, including gratuities, in excess of $300, which represents
an increase to the dollar amount of the gift limit from $100 to $300 effectuated by FINRA’s gift
rule amendment. In determining the increase to the gift limit, FINRA calculated the average
annual rate of inflation since 1992, when the limit was set at $100. 27 In response to comments
received by the Commission during the course of rulemaking with respect to FINRA’s gift rule
amendment, FINRA modified its original proposal by extrapolating this rate to account for ten
years of future inflation. 28 FINRA stated that it believed the proposed, higher gift limit would
continue to permit the exchange of business courtesies while helping to guard against
excessiveness. 29 FINRA also articulated that a dollar limit, as opposed to, for example, a
principles-based approach, would provide certainty regarding the limit for gifts and help
facilitate broker-dealer compliance. 30 The MSRB agrees that this is an appropriate approach (i.e.,
a stated dollar limit) in modernizing the MSRB’s gift limit under MSRB Rule G-20.

27

See Exchange Act Release No. 103226 (June 11, 2025), 90 FR 25674, 25675 (June 17,
2025), File No. SR-FINRA-2025-003 (“FINRA Filing”).

28

See Exchange Act Release No. 103958 (Sept. 12, 2025), 90 FR 44855, 44856 (Sept. 17,
2025), File No. SR-FINRA-2025-003 (“Amendment 1”).

29

FINRA Filing, supra note 27, 90 FR at 25675.

30

Id.
10

Thus, the proposed rule change would increase the gift limit under MSRB Rule G-20(c)
from $100 to $300, matching the increased limit under FINRA’s gift rule amendment. 31 MSRB
Rule G-20 has maintained a $100 gift limit since the late 1970s, in service of a purpose
substantively the same as the purpose of FINRA Rule 3220. 32 The proposed rule change would
also mirror FINRA’s gift rule amendment by making a conforming amendment to MSRB Rule
G-20(g)(i), increasing the dollar amount of the gift limit in relation to non-cash compensation
from $100 to $300. 33
Amendments to Harmonize With New Supplementary Material to FINRA Rule 3220
FINRA previously issued guidance and interpretations regarding the application of
FINRA gifts rules in specific contexts. FINRA’s gift rule amendment incorporates and
substantially codifies such guidance and interpretations into supplementary material to FINRA
Rule 3220. As noted above, many of the interpretations, now codified as FINRA supplementary
material, were incorporated into MSRB Rule G-20 by way of past filings. As a result, the
proposed rule change does not require significant wholesale changes to Rule G-20 to achieve

31

Proposed amendment to Rule G-20(c), mirroring FINRA Rule 3220(a).

32

Compare MSRB Rule G-20(a) (“The purpose of this rule is to maintain the integrity of
the municipal securities market and to preserve investor and public confidence in the
municipal securities market, including the bond issuance process. The rule protects
against improprieties and conflicts of interest that may arise when regulated entities or
their associated persons give gifts or gratuities in relation to the municipal securities or
municipal advisory activities of the recipients’ employers.”), with Amendment 1, supra
note 28, 90 FR at 44855 (“[FINRA Rule 3220] is designed to avoid improprieties, such as
conflicts of interest, that may arise when a [FINRA] member or associated person makes
a gift to an employee of another person, such as an institutional customer, vendor, or
counterparty with the hope of strengthening the business relationship with them.”)
(internal reference omitted).

33

Proposed amendment to Rule G-20(g)(i), mirroring FINRA non-cash compensation rules
referenced above (supra note 25).
11

harmony with those specific FINRA supplementary materials. In contrast, some new FINRA
supplementary materials impose requirements not currently found under MSRB Rule G-20, and
the proposed rule change contains corresponding proposed amendments. The proposed rule
change’s treatment of each topic is detailed below.
Gifts Incidental to Business Entertainment or Normal Business Dealings
FINRA’s interpretive guidance did not expressly exclude from its gift limit gifts given
during the course of a business entertainment event, so FINRA sought to clarify that a gift given
during the course of a business entertainment event would be subject to the $300 limit on gifts
unless one of the requisite exclusions apply (i.e., the gift given is a personal gift, of de minimis
value, or a promotional/commemorative item). FINRA’s Rule 3220.01 expressly states that,
unless a gift qualifies as a personal gift under FINRA Rule 3220.04 or as a gift of de minimis
value or a promotional or commemorative item under FINRA Rule 3220.06, a gift given during a
business entertainment event would be subject to the $300 gift limit and to the rule’s
recordkeeping requirements. 34 In its filing, FINRA further clarified the obligation under FINRA
Rule 3220.06 through an example—gifts of clothing or electronics at a business entertainment
event would be subject to its gift limit. However, pens or note pads of de minimis value given
during such business entertainment would not be subject to the gift limit provided the item meets
the requirements of 3220.06. 35
MSRB Rule G-20(d) lists gifts that are not subject to the gift limit, including, among
other things, “normal business dealings” as described in MSRB Rule G-20(d)(i). The term

34

The cost of the business entertainment event itself would not be included in the value of
the gift. FINRA Filing, supra note 27, 90 FR at 25676.

35

See FINRA Filing, supra note 27, 90 FR at 25675–76.
12

normal business dealings refers to occasional gifts of meals or tickets to theatrical, sporting, and
other entertainments that are hosted by the regulated entity or its associated persons, and the
sponsoring by the regulated entity of legitimate business functions that are recognized by the
Internal Revenue Service as deductible business expenses; provided that such gifts shall not be
so frequent or so extensive as to raise any question of propriety. The concept of normal business
dealings included in MSRB Rule G-20 effectively includes what is referred to in FINRA Rule
3220 as “business entertainment.”
While MSRB Rule G-20 currently makes clear that normal business dealings should not
be so frequent or so extensive as to raise any questions of propriety, the rule does not expressly
state that gifts given in the course of normal business dealings that are not among the types of
gifts excepted by the rule from the gift limit (e.g., gifts that are not personal, de minimis or
promotional in nature, as further described below) would themselves be subject to the gift limit.
The proposed rule change would amend subsection G-20(d)(i), which addresses normal
business dealings (including occasional gifts of meals or tickets to theatrical, sporting, and other
entertainments that are hosted by the regulated entity or its associated persons), by adding
language to explicitly state that a gift given during the course of a normal business dealing is
subject to the $300 gift limit unless it qualifies for certain other exceptions prescribed under Rule
G-20(d) 36 for gifts and gratuities not subject to the gift limit.37 This language would align closely
with FINRA Rule 3220.01.

36

These exceptions would be limited to transaction-commemorative gifts, de minimis gifts,
promotional gifts and personal gifts. See MSRB Rules G-20(d)(ii)–(iv), (vi), respectively.

37

See the final sentence of proposed MSRB Rule G-20(d)(i), mirroring FINRA Rule
3220.01.
13

Valuation of Gifts 38
FINRA Rule 3220.02, as amended by FINRA’s gift rule amendment, requires that gifts
(other than tickets to sporting or other events) be valued at cost, exclusive of tax and delivery
charges. This differs from FINRA’s previous interpretive guidance, which required that gifts be
valued at the higher of either cost or market value. In adopting FINRA’s gift rule amendment,
FINRA stated that it believes that this deviation from existing guidance is justified because the
difficulty and burdensome nature of determining the market value would result in complexity
and subjectivity in the valuation that would outweigh any benefit. 39 Otherwise, FINRA Rule
3220.02 codifies FINRA guidance and interpretations by requiring the use of the higher of cost
or face value when valuing tickets to sporting or other events, and by requiring that if gifts are
given to multiple recipients, firms should record the names of each recipient and calculate and
record the value of the gift on a pro rata per recipient basis for purposes of ensuring compliance
with the gift limit.40
Current Supplementary Material .01 of MSRB Rule G-20 largely mirrors the
requirements of FINRA Rule 3220.02 41 with the exception of the change specific to the

38

Note that the gifts discussed in this section would not ordinarily be considered normal
business dealings, as discussed above, since the gifts discussed in this section are not
meals or tickets to other events hosted by the regulated entity as legitimate business
functions. See “Gifts Incidental to Business Entertainment or Normal Business
Dealings,” supra.

39

See FINRA Filing, supra note 27, 90 FR at 25676.

40

Id.

41

Proposed Supplementary Material .01, mirroring FINRA Rule 3220.02, would include
minor, non-substantive changes to the title: “Valuations of Gifts” to “Valuation of Gifts.”
The non-substantive changes add clarity, improve organization and highlight parallels
with FINRA Rule 3220.02.
14

valuation of gifts. The proposed rule change would amend this supplementary material to
harmonize with FINRA Rule 3220.02 to value gifts at cost with the exception of tickets to
sporting or other events, which as previously mentioned would continue to be valued at the
higher of cost or face value. 42
Aggregation of Gifts
FINRA Rule 3220.03 requires the aggregation of all gifts given by its members and each
associated person of its members to a particular recipient over the course of the year, and for its
members to state in their procedures whether they are aggregating all gifts given on a calendar
year, fiscal year, or on a rolling basis beginning with the first gift to any particular recipient.
FINRA Rule 3220.03 also states that it does not apply to gifts that meet the requirements of
certain other provisions of FINRA’s gift rule amendment (i.e., personal gifts, de minimis gifts,
promotional or commemorative items).
The requirement to aggregate all gifts given and in a consistent manner over the course of
a year aligns with existing Supplementary Material .02 of MSRB Rule G-20, on aggregations of
gifts; however, Supplementary Material .02 of MSRB Rule G-20 does not currently require
regulated entities’ policies and procedures to state the requisite time frame over which all gifts
would be aggregated. Therefore, the proposed rule change would make conforming changes by
expressly stating within Supplementary Material .06, on supervision and recordkeeping, that
regulated entities’ procedures must state the requisite time frame for the aggregation (i.e.,

42

See Proposed Supplementary Material .01 of MSRB Rule G-20. While the MSRB
acknowledges the rationale for the change as articulated by FINRA with respect to the
difficulty in discerning the market value of gifts, the MSRB reminds regulated entities
that MSRB Rule G-20(d) provides that gifts otherwise excepted from the gift limit under
section (d) must not give rise to any apparent or actual material conflict of interest, and
that the principles of fair dealing under MSRB Rule G-17 also may apply, as described
above. See supra note 21 and accompanying text.
15

calendar year, fiscal year, or rolling basis). 43 The proposed rule change would further align and
harmonize with FINRA Rule 3220.03 by explicitly stating that the aggregation requirements do
not apply to gifts that meet the requirements of section (d) and that are consistent with the
requirements of Supplementary Materials .03 and .05 of MSRB Rule G-20 (i.e., transactioncommemorative/promotional gifts, de minimis gifts, bereavement gifts, personal gifts and
donations due to federally declared major disasters). 44 The MSRB believes that operationalizing
the aggregation of gifts and gratuities would be aided by policies and procedures that address the
time frame for such aggregation.
Personal Gifts
FINRA Rule 3220.04, on personal gifts, states that gifts that are given for infrequent life
events (e.g., a wedding gift or a congratulatory gift for the birth of a child) are not subject to the
gift limit restrictions in FINRA Rule 3220(a) or the recordkeeping requirements in FINRA Rule
3220(c), provided the gifts are customary and reasonable, personal in nature, and not in relation
to the business of the employer of the recipient. 45 In determining whether a gift is personal in
nature and not in relation to the business of the employer of the recipient, factors including the

43

The requisite time frame for the aggregation of gifts has been expressly incorporated into
Proposed Supplementary Material .06, on supervision and recordkeeping, which is
discussed below, due to the logical nature and fit of such policies and procedure
requirement.

44

Proposed Supplementary Material .02, mirroring FINRA Rule 3220.03. Proposed
Supplementary Material .02 would also include minor non-substantive changes to the
title: “Aggregations of Gifts” to “Aggregation of Gifts.” The non-substantive changes add
clarity, improve organization and highlight parallels with FINRA Rule 3220.03.

45

FINRA has noted that the exception for personal gifts would not apply to gifts given for
events that occur frequently, or even annually, such as birthdays. See FINRA Filing,
supra note 27, 90 FR at 25682.
16

nature of any pre-existing personal or family relationship between the person giving the gift and
the recipient and whether the associated person paid for the gift should be considered. FINRA
Rule 3220.04 also states that when its member bears the cost of a gift, either directly or by
reimbursing an associated person, there is a presumption that the gift is not personal in nature
and instead is in relation to the business of the employer of the recipient.
The proposed rule change would amend MSRB Rule G-20(d)(vi) by adding language that
would explicitly require personal gifts to be reasonable and customary. The MSRB believes that
the combination of the amended text of subsection G-20(d)(vi), which would provide an
exception for personal gifts and brief definition of the same, and the corresponding
Supplementary Material, 46 which provides additional clarification regarding the nature of
personal gifts and the exception for such gifts, would substantively align with the requirements
of FINRA Rule 3220.04. 47 To harmonize with the recordkeeping exception of FINRA Rule
3220.04, the proposed rule change would add language within new Supplementary Material .06,
on supervision and recordkeeping requirements, stating that personal gifts are not subject to the
recordkeeping requirements under MSRB Rule G-8(h)(ii) by way of incorporation into
Supplementary Material .06 of MSRB Rule G-20.
Bereavement Gifts
FINRA Rule 3220.05, on bereavement gifts, states that such gifts that are customary and
reasonable are not considered to be in relation to the business of the employer of the recipient

46

Proposed Supplementary Material .03 is renumbered from Supplementary Material .04
of MSRB Rule G-20. This Supplementary Material is substantively the same as current
Supplementary Material .04.

47

In addition, the MSRB agrees with FINRA’s assessment that the exception for personal
gifts would not apply to gifts given for events that occur frequently, or even annually,
such as birthdays.
17

and, therefore, are not subject to the gift limit. FINRA had long considered bereavement gifts to
be a type of personal gift because bereavement gifts are given for infrequent life events.
However, commenters raised concerns about treating bereavement gifts as a type of personal gift.
In response, FINRA adopted 3220.05 to separate the supplementary material from that on
personal gifts.
MSRB Rule G-20(d)(v) states that bereavement gifts that are reasonable and customary
for the circumstances are not subject to the gift limit provided they do not give rise to any
apparent or actual material conflict of interest. 48 To further align and harmonize with FINRA’s
gift rule amendment, the proposed rule change would amend subsection (d)(v) of MSRB Rule G20 by adding language explicitly stating that bereavement gifts are not considered to be in
relation to the business of the employer of the recipient. 49 The proposed rule change would also
add language within new Supplementary Material .06, on supervision and recordkeeping
requirements, stating that bereavement gifts are not subject to the recordkeeping requirements
under MSRB Rule G-8(h)(ii) by way of incorporation into Supplementary Material .06 of MSRB
Rule G-20. The MSRB believes that clarification on the exclusions under MSRB Rule G-20 will
assist regulated entities in achieving compliance objectives.
De Minimis Gifts and Promotional Gifts or Commemorative Items
FINRA Rule 3220.06(a) provides that gifts of de minimis value (e.g., pens, notepads, or
modest desk ornaments) or promotional items of nominal value that display the member's logo
(e.g., umbrellas, tote bags, or shirts) are excepted from FINRA Rule 3220’s gift limit and the

48

See MSRB Rule G-20(d)(v). The material conflict of interest caveat applies to all
exceptions under MSRB Rule G-20(d).

49

Proposed MSRB Rule G-20(d)(v), harmonizing with FINRA Rule 3220.05.
18

recordkeeping requirements under the rule, if the value of such gift or item is substantially below
the $300 gift limit. FINRA Rule 3220.06(b) provides an exception from the gift limit and
recordkeeping requirements for customary and reasonable solely decorative items
commemorating a business transaction. FINRA noted it did not believe it was necessary to
explicitly limit the value of customary commemorative items because such items must be solely
decorative. Thus, the restrictions under FINRA Rule 3220(a) would apply where the item is not
solely decorative, irrespective of whether the item was intended to commemorate a business
transaction. 50
MSRB Rule G-20(d)(ii)–(iv) already provides corresponding exceptions to the gift limit
for gifts of de minimis value (e.g., pens, notepads or modest desk ornaments), 51 promotional
items of nominal value displaying the regulated entity’s corporate or other business logo
(provided that the value be substantially below the $100 general gift limit), 52 and gifts that are
solely decorative items commemorating a business transaction, such as a customary plaque or
desk ornament (e.g., Lucite tombstone). 53 To fully align these provisions with FINRA’s gift rule
amendment, the proposed rule change would amend MSRB Rule G-20(d)(iii) by adding a
sentence explicitly stating that the value of a gift must be substantially below the $300 gift limit

50

FINRA expressed for example, providing an employee of an organization with elaborate
electronic equipment following the closing of a transaction would be subject to the gift
limit. See FINRA Filing, supra note 27, 90 FR at 25677.

51

See MSRB Rule G-20(d)(iii).

52

See MSRB Rule G-20(d)(iv). See also Proposed Supplementary Material .04 of MSRB
Rule G-20 (providing additional clarity regarding the nature of promotional items and
other business logos). Proposed Supplementary Material .04 is substantively the same as
current Supplementary Material .03.

53

See MSRB Rule G-20(d)(ii).
19

for such gift to be considered of de minimis value, and amend MSRB Rule G-20(d)(iv) to change
the gift limit from $100 to $300 and add parenthetical examples of promotional gifts (e.g.,
umbrellas, tote bags, or shirts). 54 In conforming with FINRA’s gift rule amendment, the
proposed rule change would add language to new Supplementary Material .06, on supervision
and recordkeeping, stating that personal gifts are not subject to the recordkeeping requirements
under MSRB Rule G-8(h)(ii) by way of incorporation into Supplementary Material .06 of MSRB
Rule G-20. In addition, the proposed rule change would renumber Supplementary Material .03,
on promotional gifts and “other business logo,” to Supplementary Material .04.
Donations Due to Federally Declared Major Disasters
FINRA Rule 3220.07 codifies FINRA interpretive guidance stating that donations to an
employee of an institutional customer to provide assistance to an individual in connection with a
federally declared major disaster, such as a wild fire, hurricane, tornado, earthquake, or flood, are
not considered to be in relation to the business of the employer of the recipient and are therefore
not subject to the gift limit. The proposed rule change would add Supplementary Material .05 of
MSRB Rule G-20 and would directly mirror FINRA Rule 3220.07. 55 The MSRB agrees with
FINRA that such donations are not in relation to the business of the employer of the recipient,
and therefore, should be excluded from the gift limit and recordkeeping requirements under
MSRB Rule G-8(h)(ii).

54

The proposed rule change would amend MSRB Rule G-20(d)(iv), to mirror FINRA Rule
3220.06, by updating the gift limit to $300 and by adding parenthetical examples of
promotional gifts. As previously noted, the rule is consistent in all other respects.

55

Proposed Supplementary Material .05, to mirror FINRA Rule 3220.07.
20

Supervision and Recordkeeping
Citing FINRA Rule 3110, on supervision, FINRA Rule 3220.08 requires a supervisory
system that is reasonably designed to achieve compliance with Rule 3220. 56 Specifically, FINRA
Rule 3220.08 requires FINRA members to have systems and procedures reasonably designed to
ensure that payments and gratuities in relation to the business of the employer of the recipient
given by the member firm and its associated persons to employees of another person are: (1)
reported to the firm; (2) reviewed for compliance with Rule 3220; and (3) maintained in the
firm’s records. 57 FINRA Rule 3220.08 also requires procedures reasonably designed to ensure
that the person giving a gift or gratuity is not the same person responsible for determining
whether that gift or gratuity is related to the business of the recipient’s employer. Finally, this
provision restates that gifts described in FINRA Rule 3220.04, on personal gifts, FINRA Rule
3220.05, on bereavement gifts, FINRA Rule 3220.06, on de minimis gifts and promotional or
commemorative items, 58 and FINRA Rule 3220.07, on donations due to federally declared major
disasters, are not subject to the recordkeeping requirements of the rule. 59
The proposed rule change would add new Supplementary Material .06, on supervision
and recordkeeping, that substantively aligns with FINRA Rule 3220.08 by mirroring the

56

Amendment 1, supra note 28, 90 FR at 44858.

57

Id.

58

FINRA has previously stated that its gift rule does not apply to gifts of de minimis value
(e.g., pens, notepads or modest desk ornaments). See NASD Notice to Members 06-69,
NASD Issues Additional Guidance on Rule 3060 (Influencing or Rewarding Employees
of Others) (Dec. 4, 2006), available at https://www.finra.org/rules-guidance/notices/0669.

59

Id.
21

language that clarifies the nature of the requirements necessary to achieve compliance with the
rule. 60 The supervisory requirements expressly state that procedures must be reasonably designed
to ensure that the person giving the gift or gratuity is not the same person responsible for
determining whether the gift or gratuity is in relation to the business of the recipient’s employer.
However, this provision does not account for the uniqueness of the regulatory framework for
small municipal advisors. The proposed rule change caveats this supervisory requirement by
permitting municipal advisors to carry out their compliance obligation in accordance with
Supplementary Material .03 of Rule G-44. 61 Additionally, the proposed rule change adds
language to clarify that regulated entities are not required to maintain records of gifts not subject
to the general limitation of section (c) as described in section (d) and that are consistent with the
requirements of Supplementary Materials .03 and .05 of this rule. The MSRB believes aligning
the substantive provisions that directly address the standards necessary to achieve compliance is
the most direct way to promote regulatory harmonization and reduce compliance burdens for
firms subject to the rules of multiple regulators.
The recordkeeping requirements would not apply to normal business dealings, de
minimis gifts, promotional or commemorative items, personal gifts, bereavement gifts or
donations due to federally declared major disasters 62 because such gifts, by their very nature,
should be infrequent or customary and reasonable for the circumstances, depending on the nature
of the gift in question. Although the MSRB is not requiring records to be made and maintained

60

Proposed Supplementary Material .06, to mirror FINRA Rule 3220.08.

61

Pursuant to Supplementary Material .03 of MSRB Rule G-44, a municipal advisor is
permitted to tailor its written supervisory procedures based on, among other things, an
advisor’s size.

62

Proposed Supplementary Material .05, to mirror FINRA Rule 3220.07.
22

related to normal business dealings, the MSRB notes that regulated entities may determine to
implement recordkeeping requirements in this area as part of their supervisory system to achieve
compliance with the MSRB’s gift rule. The MSRB believes that a principles-based approach to
recordkeeping requirements for normal business dealings is a more prudent approach given the
application to both dealers and municipal advisors, and additional, potentially unnecessary,
administrative costs associated with making and maintaining such records. As such, regulated
entities should decide whether records should be made and maintained, based on the facts and
circumstances specific to any given normal business dealing. The MSRB notes that regulated
entities should make such determination in the context of their overall supervisory obligations
and in ensuring their supervisory system is reasonably designed to achieve compliance with
MSRB rules and other applicable securities laws and regulations.
Gifts to a Regulated Entity’s Associated Persons or Individual Retail Investors
FINRA Rule 3220.09 states that FINRA Rule 3220 does not apply to “gifts from a
member to its own associated persons, or to gifts from a member or an associated person to
individual retail customers.” Although the substance of this provision was already implied by the
text of FINRA Rule 3220, FINRA added Rule 3220.09 to clarify and improve awareness and
understanding of the scope of FINRA’s gift rule amendment. 63 The proposed rule change would
add new Supplementary Material .07 to MSRB Rule G-20 directly mirroring FINRA Rule
3220.09. 64

63

See FINRA Approval Order, supra note 3, 91 FR at 7574.

64

Proposed Supplementary Material .07, to mirror FINRA Rule 3220.09.
23

Minor Technical Language Changes
Finally, the proposed rule change would make a limited number of non-substantive
technical changes to rule language to improve consistency and clarity. Current rule language
inconsistently refers to sections of MSRB Rule G-20 and its Supplementary Materials; the
proposed rule change would correct these inconsistencies. In addition, the proposed rule change
would make a technical amendment to renumber existing Supplementary Material .05, on
applicability of state or other laws, to Supplementary Material .08.
Provision from FINRA’s Gift Rule Amendment Omitted from Proposed Rule Change
FINRA’s gift rule amendment includes a new section within Rule 3220, 65 which
authorizes FINRA staff, pursuant to the FINRA Rule 9600 series, to conditionally or
unconditionally grant an exemption from any provision of FINRA Rule 3220 for good cause
shown, after taking into account all relevant factors and provided that such exemption is
consistent with the purposes of FINRA Rule 3220, the protection of investors, and the public
interest. 66
The proposed rule change does not include a corresponding amendment to MSRB Rule
G-20 due to the unique regulatory structure under Section 15B of the Exchange Act, 67 which
requires the MSRB to undertake rulemaking responsibilities while assigning examination and
enforcement authority to other regulators such as the Commission, FINRA and the federal
banking regulators. Any amendment to MSRB Rule G-20 to permit regulated entities to seek
exemptive relief would require a regulated entity to submit its request to the appropriate

65

FINRA Rule 3220(d).

66

Id.

67

15 U.S.C. 78o-4.
24

regulator (i.e., not the MSRB) for consideration and potential exemptive action under that
regulator’s procedures. At such time as the appropriate regulators have processes in place, or
agree to put such processes in place, to potentially receive, review and act on any such exemptive
requests, the MSRB could consider whether to adopt a further provision to MSRB Rule G-20 to
institute a similar exemptive relief mechanism.
Operative and Compliance Dates
As previously mentioned, the operative date for the proposed rule change would be June
1, 2026, for dealers that are FINRA members. However, a separate compliance date of December
1, 2026, would apply for all municipal advisors as well as bank dealers with respect to the
proposed rule change. Until such compliance date for municipal advisors and bank dealers, such
regulated entities would be subject to the existing provisions of MSRB Rule G-20, including, but
not limited to, the gift limit (i.e., $100 limit per person per year) and overarching supervisory and
recordkeeping requirements, as applicable.
The delayed compliance date for all municipal advisors and bank dealers is designed to
provide such regulated entities sufficient time to revise their policies and procedures and their
recordkeeping and related processes to ensure efficient and effective compliance with the new
requirements of the proposed rule change without creating unnecessary burdens or disruption.
While FINRA member firms should have come into compliance with the comparable policies
and procedures under FINRA Rule 3220 in connection with their other securities market
activities, non-dealer municipal advisors, as well as bank dealers, would need time to make any
necessary changes.
Exchange Act Section 15B(b)(2)(L)(iv) directs the MSRB to adopt rules with respect to
municipal advisors that do not impose a regulatory burden on small municipal advisors that is
25

not necessary or appropriate in the public interest and for the protection of investors, municipal
entities, and obligated persons, provided that there is robust protection of investors against
fraud. 68 In response to a request for information published by the MSRB in 2023 seeking input
on the impacts of MSRB rules on small firms (the “Small Firm RFI”), 69 one commenter noted
“[m]any firms do seek outside counsel or compliance professionals to assist with their
compliance programs. These costs may represent the price of doing business, but place greater
financial and administrative burdens on smaller firms. The cost of external compliance review
and/or development and maintenance of written supervisory procedures (‘WSP’)/policies and
procedures, etc., are typically not based on the size of the firm, but rather a fixed cost to firms.
That proportionately places greater costs on small firms.” 70 This commenter also asked that the
MSRB confer with small municipal advisors to discuss how small municipal advisors “approach
reviewing new/updated rules, making changes to their WSPs, and implementing compliance and
supervisory procedures.” 71
Focusing across both dealer and municipal advisor firms, another commenter on the
Small Firm RFI “… urge[d] the Board to consider how its potential rule changes would affect all
market participants, including smaller BDs, and to write rules which do not impose unreasonable

68

15 U.S.C. 78o-4(b)(2)(L)(iv).

69

MSRB Notice 2023-11, Request for Information on Impacts of MSRB Rules on Small
Firms (Dec. 4, 2023), available at https://www.msrb.org/sites/default/files/2023-12/202311.pdf.

70

See Letter from Susan Gaffney, Executive Director, National Association of Municipal
Advisors, p. 2 (Feb. 26, 2024), available at https://www.msrb.org/sites/default/files/202402/NAMAsmallfirmFEB2024.pdf.

71

Id. at 4.
26

compliance standards on any market participant, big or small. This is especially important with
respect to implementation periods for regulatory changes. In many cases, it may reasonably take
smaller firms more time to implement rule changes than larger firms due to fewer resources
available for the task. We urge the Board to consider the effects of its rule amendments on those
firms that would be particularly challenged and to gauge implementation times to ensure all
firms are able to be fully compliant on a rule’s effective date.” 72
The MSRB believes that providing additional time to come into compliance with the new
supervisory and recordkeeping requirements in the proposed rule change is responsive to these
concerns and suggestions.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with Section
15B(b)(2)(C) of the Exchange Act, 73 which provides that the MSRB's rules shall be designed to
prevent fraudulent and manipulative acts and practices, to promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating transactions in municipal
securities and municipal financial products, to remove impediments to and perfect the
mechanism of a free and open market in municipal securities and municipal financial products,
and, in general, to protect investors, municipal entities, obligated persons, and the public interest.

72

See Letter from Michael Decker, Senior Vice President, Bond Dealers of America, p.2
(Feb. 26, 2024), available at https://www.msrb.org/sites/default/files/2024-02/BDANotice-2023-11.pdf.

73

15 U.S.C. 78o-4(b)(2)(C).
27

In accordance with Section 15B(b)(2)(C) of the Exchange Act, 74 the proposed rule
change is designed to prevent fraudulent and manipulative acts and practices. Although the
proposed rule change would increase the gift limit, it continues to protect investors and preserve
public confidence in the municipal securities market because the proposed rule change would
also put into place additional provisions strengthening supervision and recordkeeping
requirements designed to prevent fraudulent acts and manipulative practices. 75 For example, the
proposed rule change would require policies and procedures to be reasonably designed to ensure
that the associated person giving a gift is not also the person responsible for the determination of
whether the gift in question is in relation to the municipal securities or municipal advisory
activities of the employer of the gift’s recipient. Not only is the proposed rule change consistent
with the explicit purpose of MSRB Rule G-20, but also increased harmonization with the
corresponding FINRA provisions is intended to provide a practical and balanced way for
regulated entities to continue effectively meeting the core regulatory obligation to establish and
maintain a system to supervise the activities of each associated person that is reasonably
designed to achieve compliance with applicable securities laws and regulations and with
applicable MSRB rules, which directly serves investor protection. Furthermore, the proposed
rule change clarifies the supervisory obligations of regulated entities and provides greater
flexibility to design and implement necessary policies and procedures.
By aligning the requirements of MSRB Rule G-20 with FINRA’s gift rule amendment,
the proposed rule change promotes just and equitable principles of trade by ensuring all regulated

74

Id.

75

MSRB Rule G-20(a) (stating that the purpose of MSRB Rule G-20 is to preserve investor
and public confidence in the municipal securities market, including the bond issuance
process).
28

entities are subject to the same regulatory standard under both FINRA and MSRB rules. This
regulatory consistency would allow regulated entities that are subject to FINRA and MSRB rules
to more efficiently design and implement policies and procedures to ensure compliance with both
MSRB Rule G-20 and with FINRA’s gift rule amendment without the burden or confusion of
differing regulatory requirements. The MSRB believes that the proposed rule change would
alleviate some of the operational challenges regulated entities would otherwise experience due to
regulatory uncertainty—regulated entities would be able to more effectively allocate resources to
the operations that facilitate transactions in municipal securities, and thereby, removing
impediments to a free and open market.
Finally, aligning MSRB Rule G-20 with FINRA’s gift rule amendment fosters
cooperation between regulators because it creates as close as possible a uniform standard, with
minimal distinction needed between the treatment of municipal securities and other asset classes,
enabling FINRA and the Commission to more efficiently inspect regulated entities subject to the
rules of both self-regulatory organizations.
In addition, Section 15B(b)(2)(L)(iv) of the Exchange Act provides that MSRB rules may
not impose a regulatory burden on small municipal advisors that is not necessary or appropriate
in the public interest and for the protection of investors, municipal entities, and obligated persons
provided that there is robust protection of investors against fraud. 76 While the proposed rule
change would burden some small municipal advisors, the MSRB believes that any such burden is
outweighed by the need to maintain the integrity of the municipal securities market by extending
to municipal advisors the same regulatory obligations by which dealers have to operate with
respect to the protection of investors and the public interest. The MSRB believes that clarifying

76

15 U.S.C. 78o-4(b)(2)(L)(iv).
29

the narrow exclusions to the gift limit would reduce the chances of potential violations of the
public trust by having rules of the road on how municipal advisors engage with elected officials
and other market participants involved in the issuance of municipal securities. Moreover,
municipal advisors having to state in their procedures whether they are aggregating all gifts on a
calendar year, fiscal year, or on a rolling basis beginning with the first gift to any particular
recipient ensures gifts are not given so frequently that they unduly influence the awarding of
municipal advisor business. Finally, both the delayed compliance date for proposed
Supplementary Material .06 with respect to supervisory and recordkeeping requirements and the
exception for municipal advisors to certain supervisory requirements via reliance on
Supplementary Material .03 of MSRB Rule G-44 would serve to reduce the regulatory burden on
small municipal advisors in a manner consistent with Section 15B(b)(2)(L)(iv) of the Exchange
Act. 77
The MSRB also believes that the proposed rule change is consistent with Section
15B(b)(2)(G) of the Exchange Act, 78 which provides that the MSRB’s rules shall prescribe
records to be made and kept by municipal securities brokers, municipal securities dealers, and
municipal advisors and the periods for which such records shall be preserved. The MSRB
believes that the proposed rule change related to recordkeeping requirements under MSRB Rule
G-20 coupled with existing obligations under MSRB Rule G-8 would promote compliance with
and facilitate enforcement of the proposed rule change by clarifying the records that must be
preserved. The proposed rule change would also improve recordkeeping by specifying that gifts

77

Id.

78

15 U.S.C. 78o-4(b)(2)(G).
30

that are normal business dealings, de minimis gifts, promotional or commemorative items,
personal gifts, bereavement gifts or donations due to federally declared major disasters are not
subject to the recordkeeping requirements.
B.

Self-Regulatory Organization’s Statement on Burden on Competition

Section 15B(b)(2)(C) of the Exchange Act 79 requires that MSRB rules not be designed to
impose any burden on competition not necessary or appropriate in furtherance of the purposes of
the Exchange Act. In addition, Section 15B(b)(2)(L)(iv) of the Exchange Act 80 provides that
MSRB rules may not impose a regulatory burden on small municipal advisors that is not
necessary or appropriate in the public interest and for the protection of investors, municipal
entities, and obligated persons provided that there is robust protection of investors against fraud.
In determining whether the standards have been met, the MSRB was guided by the MSRB’s
Policy on the Use of Economic Analysis in MSRB Rulemaking. 81 In accordance with this policy,
the MSRB evaluated the potential impacts on competition of the proposed rule change and
believes that the proposed rule change would not impose any unnecessary or inappropriate

79

15 U.S.C. 78o-4(b)(2)(C).

80

15 U.S.C. 78o-4(b)(2)(L)(iv).

81

See Policy on the Use of Economic Analysis in MSRB Rulemaking, available at
https://www.msrb.org/Policy-Use-Economic-Analysis-MSRB-Rulemaking. In evaluating
whether there was any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act, the MSRB was guided by its principles
that required the MSRB to consider costs and benefits of a rule change, its impact on
efficiency, capital formation and competition, and the main reasonable alternative
regulatory approaches. For those rule changes which the MSRB files for immediate
effectiveness under Section 19(b)(3)(A) of the Exchange Act (15 U.S.C. 78s(b)(3)(A)),
including information facility rule fillings, while not subject to the policy, the MSRB
usually focuses its examination exclusively on the burden of competition on regulated
entities, but may also include any additional economic analysis that the MSRB believes
may inform the rulemaking process based on the facts and circumstances.
31

burden on competition, as the proposed rule change would align with the newly approved
amendments to FINRA Rule 3220, on influencing or rewarding employees of others. In addition,
the proposed rule change would be applied equally to all regulated entities (i.e., dealers and
municipal advisors).
Based on the MSRB’s analysis, the potential benefits of the proposed rule change would
outweigh the potential costs of the change. The proposed rule change benefits dealers by aligning
the gift limit in MSRB Rule G-20 with FINRA Rule 3220 that accounts for past and future
inflationary increases. This consistency supports the development of uniform compliance
processes and systems across both MSRB-regulated entities and FINRA-member firms.
Currently, the $100 gift limit in MSRB Rule G-20 was established in 1978 by the MSRB and by
FINRA in 1992 without accounting for the inflation rate. The proposed amendments ensure that
the gift limit remains the same between corresponding MSRB and FINRA rules to reduce
unnecessary compliance burdens for firms. If the MSRB and FINRA maintained differing gift
limits it may needlessly complicate and confuse the gifting process. In addition, the proposed
rule change would increase the gift limit from $100 to $300 which would benefit regulated
entities that engage in gift giving as part of the process to develop relationships and goodwill
while also maintaining the protections for investors and public interest. Additionally, to align
with the FINRA Rule 3220 changes when necessary, the proposed rule change includes
supplementary material regarding gifts incidental to business entertainment, donations due to
federally declared major disasters, supervision and recordkeeping and gifts to associated persons
or individual retail customers.
The MSRB acknowledges that regulated entities would likely incur minor costs because
of the proposed rule change, relative to the baseline state (current state). Regulated entities would
32

be expected to incur one-time, upfront costs related to revising policies and procedures and
training. The MSRB expects the proposed rule change to cost regulated entities $4,229 as a onetime, upfront cost to review and implement the changes along with any needed staff training. 82
The MSRB does not expect any material incremental ongoing costs for compliance-related tasks,
including recordkeeping.
Effect on Competition, Efficiency and Capital Formation
The MSRB believes that the proposed rule change would neither impose a burden on
competition nor hinder capital formation, as the proposed rule change is applicable to all
regulated entities and the ongoing costs should be proportional to entity size, and the upfront
costs are relatively minor for all regulated entities. The proposed amendments to MSRB Rule G20 would improve the municipal securities market’s operational efficiency and promote
regulatory harmony with FINRA’s gift rules. At present, the MSRB is unable to quantitatively

82

The MSRB estimates three hours for a compliance manager at $393 per hour (3 X $393 =
$1,179) to revise the firm policies and procedures, and one hour for in-house compliance
counsel to review and edit any changes as needed (1 X $463 = $463). Staff also
anticipates review by an outside legal counsel at $630 per hour (1 X $630 = $630),
review and sign off by a director of compliance at $610 per hour (1 X $610 = $610),
General Counsel at $780 per hour (0.5 X $780 = $390) and the chief compliance officer
at $693 per hour (0.5 X $693 = $347). Lastly, staff anticipates one hour of training and
education conducted by the director of compliance at $610 per hour (1 X $610 = $610).
Therefore, staff estimates that the total upfront costs would be $4,229 ($1,179 + $463 +
$630 + $610 + $390 + $347 + $610 = $4,229).
The hourly-rate data is gathered from a variety of Commission filings compiled by the
MSRB for usage in economic analysis. The Commission’s economic analysis utilizes the
Securities Industry and Financial Markets Association’s “Management & Professional
Earnings in the Securities Industry—2013 Report” for the hourly rates of various
financial industry market professionals. To compensate for inflation, the data reflects the
2025 hourly rate level after adjusting for the annual cumulative wage inflation rate of
47.3% between 2013 and 2025. See The Federal Reserve Bank of St. Louis Employment
Cost Index: Wages and Salaries: Private Industry Workers, available at
https://fred.stlouisfed.org/series/ECIWAG. The MSRB estimates the number of hours for
each task based on MSRB’s consultation with regulated entities’ compliance officers.
33

evaluate the magnitude of the efficiency gains or losses but believes the benefits from mostly
aligning MSRB Rule G-20 with FINRA Rule 3220 would outweigh the upfront costs of revising
policies and procedures, as well as the ongoing compliance and recordkeeping costs to regulated
entities. The MSRB recognizes that small dealers, municipal advisors and especially sole
proprietors may not employ full-time compliance staff and that the overall cost of ensuring
compliance with the requirements of the proposed rule change may be proportionally higher for
these smaller firms. Still, the MSRB expects the upfront costs to be minor for all firms and the
ongoing costs should be proportional to the size of each regulated entity.
C.

Self-Regulatory Organization’s Statement on Comments on the Proposed Rule
Change Received from Members, Participants, or Others

Written comments were neither solicited nor received on the proposed rule change. 83
III.

Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Because the foregoing proposed rule change does not: (i) significantly affect the

protection of investors or the public interest; (ii) impose any significant burden on competition;
and (iii) become operative for 30 days from the date on which it was filed, or such shorter time
as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the
Exchange Act 84 and Rule 19b-4(f)(6) 85 thereunder. At any time within 60 days of the filing of
the proposed rule change, the Commission summarily may temporarily suspend such rule change
if it appears to the Commission that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act.

83

Comments received in response to FINRA’s gift rule amendment can be found at
https://www.sec.gov/comments/sr-finra-2025-003/srfinra2025003.htm.

84

15 U.S.C. 78s(b)(3)(A).

85

17 CFR 240.19b-4(f)(6).
34

IV.

Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning

the foregoing, including whether the proposed rule change is consistent with the Exchange Act.
Comments may be submitted by any of the following methods:
Electronic Comments:
•

Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or

•

Send an email to rule-comments@sec.gov. Please include File Number SR-MSRB-202602 on the subject line.

35

Paper Comments:
•

Send paper comments in triplicate to Secretary, Securities and Exchange Commission,
100 F Street, NE, Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2026-02. This file number should be
included on the subject line if email is used. To help the Commission process and review your
comments more efficiently, please use only one method. The Commission will post all
comments on the Commission’s Internet website (http://www.sec.gov/rules/sro.shtml). Copies of
the filing will be available for inspection and copying at the principal office of the MSRB. Do
not include personal identifiable information in submissions; you should submit only information
that you wish to make available publicly. We may redact in part or withhold entirely from
publication submitted material that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-MSRB-2026-02 and should be submitted on or before [INSERT
DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].
For the Commission, pursuant to delegated authority. 86

J. Matthew DeLesDernier,
Deputy Secretary.

86

17 CFR 200.30-3(a)(12).
36

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A67b48d8f3b0cef4b. Public record. Not legal advice.