The New York Stock Exchange plans to tighten rules on how members or member firms entertain their clients, with a rule filing to the SEC "imminent," according to Brendan Intindola, a spokesman for the NYSE's regulatory unit.
"The purpose of the rule is to prohibit the employees of a broker-dealer 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," Grace Vogel, executive vice president of NYSE division of member firm regulation, said in a news release.
The NYSE's existing Rule 350 prohibits any member or member firm from giving any gift or gratuity of more than $100 per person per year, but guidance on entertainment has been less clear. Officials of the NYSE and the NASD have been working together to develop consistent guidance on appropriate business entertainment.
In a related move, the NASD today released new policies and procedures for registered firms regarding business entertainment. The proposals are open for public comment until Feb. 23.
The proposal would require registered firms, among other things, to determine and define the forms of business entertainment that are appropriate or inappropriate, maintain detailed records of the nature and expense of business entertainment, and establish standards for supervising, approving and documenting business entertainment expenses.
"The foundational principle of this rule is that conduct cannot undermine the performance of an employee's duty to a customer," NASD Chairman and CEO Robert R. Glauber said in a separate news release. "Firms must design standards for entertainment that are consistent with high standards of commercial honor, and they must develop robust policies and procedures to ensure compliance."