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NYSE, NASD Join SEC On Wall Street Gift Rules


Mutual fund companies may soon find the small, and sometimes not so small, perks from brokerage houses run dry.

The New York Stock Exchange and NASD are exploring a single, stricter gift rule that would spell out, in no uncertain terms, what is permissible, according to a report last week.

In fact, NYSE recently sent a one-page proposal to the Securities Industry Association that would require upper management sign-offs on business travel and expenses, along with added disclosure.

In cases where travel involves private jets and hotel stays of two nights or more, some at the NYSE believe the compliance department should get involved.

The Securities and Exchange Commission doesn't have any clear-cut rules on gifts from brokers to mutual funds, only requiring fund companies to keep the best interest of their shareholders in mind; NASD's current rule limits expenditures per client to $100 a year.

Some of the new ideas being bounced around hinge on a $350 price point. One notion at the NASD, for example, would limit a brokerage firm's expenditures per client to $350 a year. If the Big Board has its way, however, the rules would be a little more lenient, permitting a brokerage firm to spend $350 a head per business event and up to $1,000 a person for a conference.

At issue is the integrity of the directed-brokerage business between mutual fund companies and their Wall Street partners. According to numerous reports and SEC filings, these gifts from wirehouses and independents can sometimes get out of hand. One Jefferies Group trader shelled out $10,000 worth of expensive wine to his counterparts at Fidelity Investments, according to The Wall Street Journal.

The SEC is now looking into tickets to the 2002 Seoul Winter Olympics that Fidelity Chairman Ned Johnson received, along with other allegedly questionable gift-giving to his daughter, Abigail Johnson, and star portfolio manager Peter Lynch (see MME 7/4/05.)

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