Gifting at Wall St

The long-awaited rules on gifts and business entertainment appear to be simple: each NASD member firm8212;there are about 5,100 of them8212;will have to write its own policy and find a way to police it effectively. The objective of the rules is also simple: don8217;t entertain in such a way that the client is influenced to award business, like trading, that is not in the best interest of the customer.

The rules represent a shift away from rigid spending guidelines toward a policy that gives firms goals and essentially asks them to use good judgment.

The policy stands in marked contrast to the climate in Washington, where wining and dining has fallen into disfavor. In the House and Senate, there have been calls to limit the opportunities for lobbyists to provide lawmakers with benefits like luxury golf outings or Super Bowl tickets.

Wall Street, not surprisingly, prefers the approach taken by NASD and the New York Exchange. 8216;8216;We8217;re pleased the NASD chose to take a principles-based approach,8217;8217; said Travis Larson, a spokesman for the Securities Industry Association, the industry8217;s primary trade association. 8216;8216;It recognizes that there are different business models and different approaches within our industry, yet requires clear policies and procedures, education, training, audit and review.8217;8217;

Yet, one bank8217;s expensive wine is another man8217;s grape juice. What8217;s the proper limit for a closing dinner if the deal generated a 1 million fee? A 30 million fee? What if a company buys a block of tickets that cost 1,000 each, but the face value on the ticket is 62.50? Should traders and bankers have different rules? As one Wall Street lawyer said: 8216;8216;When is it bribing and when is it creating a relationship?8217;8217;

The old rules needed improvement. NASD Rule 3060 prohibited any firm or its employees from giving anything worth more than 100 to anyone with whom the member firm employee did business. In 1999, NASD clarified that the rule did not prohibit 8216;8216;ordinary business entertainment8217;8217; provided that it was not so frequent or extensive as to invite questions about its propriety.

The new rules require that member firms define what is appropriate entertainment, including what sites can be visited, the nature and frequency of such visits, the type of transportation and accommodations and either 8220;firm dollar limits or thresholds requiring advance written proposals.8221;

The new rules also require common sense, which can run short on Wall Street. NYT