In the second in a series of conversations with Maribel Gerstner, Assistant VP and chief compliance officer for Allstate Distributors, she shares her understanding of the Financial Industry Regulatory Authority rules relating to incentive meetings. Look for her guidance regarding rules on gifts in the next issue of FIM. And find our conversation about the rules covering training and education meetings by visiting and clicking on regulations/compliance.

Q: To whom do FINRA rules apply?

A: Banks and broker/dealers that sell securities products and are registered with FINRA. The training and education rules typically come into play when your company is a product provider and you want to get registered reps who work for other companies to sell your products. These meetings must have educational content in order to allow your company to pay the expenses of reps that work for another firm. Pure incentive trips can be offered only to registered reps of your own company.

Q: Is there any situation in which a meeting planner is on safe ground booking a pure incentive trip?

A: Yes. The key to meeting the FINRA rule for “award trips” is that similar types of products must have similar weights. In other words, it's not just a company's proprietary products that can count toward qualification for the trip, but all products in a specific category. Take a step back and you can see the reason for this rule. The whole purpose of FINRA rules is to protect the consumer. If the rep qualifies to win a fabulous trip only if he/she sells certain products, then that could improperly influence the rep to offer customers the products that count toward the trip. Reps need to offer customers products that are suitable for their financial circumstances.

Q: What other rules come into play?

A: State insurance regulations and federal and state income tax rules must be considered as well. If the rep sells insurance products, such as variable annuities and variable life insurance, which are regulated at the state level, the state insurance rules that apply to that rep must also be consulted. Allstate actually has a separate company for New York reps because the rules are so complex. For example, New York does not permit pure incentive trips for financial services agents. There must be educational content for a substantial part of each day. Is the trip taxable for attendees? That usually depends on whether there is business content or not. If the trip has no business content, its value could be included in taxable income.

Q: As companies work through their own FINRA compliance, could some incentive trips be recast as education conferences?

A: Yes, but it wouldn't be an incentive trip, it would be a training and education meeting.

Q: What is the most important information planners should record?

A: The meeting planner has to ensure that the reps have properly qualified to attend the trip. This includes confirmation that they qualified based on the sales requirements and that they are approved by the compliance department to attend. Then, all of the expenses of the trip have to be tracked, and if they are taxable, this information has to be reported to the financial area that is responsible for rep compensation.

Q: Does Allstate Financial hold incentive trips?

A: Yes, we have incentive trips for our own reps. We also sponsor training and education conferences for our reps and for reps of other firms.