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Financial companies face new business entertainment rules

Last year, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) enacted rules about gift giving that dictated member companies stay within a $100-per-year gift limit to prospective customers. Recently, both organizations submitted proposed rule changes to the U.S. Securities and Exchange Commission putting limits on business entertainment, which was not specifically regulated by NASD Rule 3060 and NYSE Rule 350.

Under the new rule changes, members must adopt and implement written policies and procedures governing their business entertainment, maintain detailed records of business entertainment expenses, and provide each customer with business entertainment records relating to its customer representatives, upon request.

Members also must either impose specific dollar limits on business entertainment or require written pre-approval of any entertainment exceeding a specified dollar threshold determined by the company. For an event to be deemed “business entertainment,” a member must accompany the customer representative to, or participate in, an event. Otherwise, it is considered a gift.