It’s that time of year again! The end of the year brings opportunity for corporate gift giving and holiday events—and with that ample risk for conflicts of interest.
Are your gifts and entertainment policies wrapped up in anticipation of the upcoming holiday season?
A business gift to a client or vendor can be appropriate in the right circumstances. Conflicts of interest can arise however when the gift is given to influence business instead of just to show appreciation. Accepting or giving improper gifts or hospitality opens the door to regulatory scrutiny and reputational damage, even if the conflict is unintentional. Take a closer look at Gifts and Entertainment compliance across global organizations.
During our CCO Webcast: Key Issues in Small Firm Compliance, Hope Newsome and Samantha Osbourne provided guidance on this timely topic that applies to firms of all sizes.
According to Newsome, gifts and entertainment policies can be idle, and then come to the forefront of attention at the end of the year. That’s especially true in the context of COVID, as in-person events are beginning to be held again and employees might need reminders of what’s acceptable under firm policies.
Newsome suggests that firms take the time to review their current Gifts and Entertainment policies and procedures in advance of the holiday season. If you’re a Broker Dealer or Dually Registered you might be using the $100 limit outlined in FINRA’s Rule 3220. RIA firms might have a higher limit. She also notes that an area of confusion for employees is often around non-cash and in-kind gifts. Policies should go beyond items like event tickets and meals and take into account in-kind gifts like charitable donations and event sponsorships.
Newsome also reminds CCO’s that they should ensure that all employees are aware of the firm’s G&E policies and procedures, and that there’s a framework in place that provides the disclosures and reporting to monitor adherence. She notes that sharing examples of recent enforcement actions provides an excellent opportunity to educate your team. Read about a firm sanctioned for spending $25 million on entertainment and gifts.
Osbourne brought up the important point that an employee doesn’t have to be registered to be covered under the firm’s gifts and entertainment policy. She shared the example that an administrative assistant who manages gifts for an adviser is also subject to the firm’s reporting and disclosure policies. She suggests that it’s important to focus less on who is giving a gift, and more on who is receiving the gift. Osbourne also reinforced that it’s important that everyone across the organization understands their obligations, especially employees in client facing roles.
Watch the On-Demand CCO Webcast: Key Issues in Small Firm Compliance.
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