It might be time to rethink the client Christmas party.
In an aggressive move to limit broker-dealer employees from giving lavish gifts to their clients, the
New York Stock Exchange
and the NASD have proposed new and stricter rules to the
Securities and Exchange Commission
for business entertainment.
The proposals would require each firm to set up written policies that define acceptable forms of entertainment, while outlining those that are considered off limits. If the regulations pass, individual firms would have to specify dollar limits on money spent on entertaining clients, plus make sure the rules were followed.
"The purpose of the rule is to prohibit the employees of a broker-deal from providing business entertainment to a client, particularly one who is acting in a fiduciary capacity, that is intended to cause the client to act in a manner inconsistent with the best interests of his or her employer or customer," said Grace Vogel executive vice president of NYSE Regulation's division of Member Firm Regulation.
The prior rule, amended in March 2004, limited gifts to clients in excess of $100 per person per year. Guidance regarding the type of allowed entertainment under these rules was not defined. The new proposal hopes to "provide greater clarity concerning the forms of business entertainment that are appropriate."
The proposal follows reports earlier this month about
firing three of its employees after a strip-club soiree with a client in Arizona. Recently, six women from Dresdner Kleinwort Wasserstein Services filed a law suit against the company that cited instances in which firm employees entertained clients at a strip club.
Although laws regarding client gifts have gotten stricter since the more haphazard days of the mid-1990s, a number of extravagant gifts and events are still given to some of Wall Street's biggest clients. If the new proposals pass, they will be the first since 2004 that governs client gifts.