ICI Comments on NASD Business Entertainment Practices Guidance, February 2006

Washington, DC, February 26, 2006 - ICI supports NASD's proposed interpretive material on NASD Rule 3060 addressing business entertainment practices of member firms. In a recent comment letter, ICI notes that increased guidance in this area is appropriate given the potential conflicts of interest raised by gifts and other benefits provided to employees of entities that use the services of NASD member firms.

Background
In January 2006, NASD issued a Notice to Members proposing interpretive material to more explicitly outline the policies and procedures a member must adopt in connection with its business entertainment practices with employees of a customer. Rule 3060 prohibits any member or person associated with a member, directly or indirectly, from giving anything of value in excess of $100 per year to any person where such payment is in relation to the business of the recipient's employer. The rule protects against improprieties that may arise when members or their associated persons give gifts or gratuities to employees of a customer.

ICI Position
ICI supports NASD's interpretive material and makes several comments and recommendations in its letter. Specifically, ICI recommends that NASD:

clarify that the proposed IM does not address situations already covered under Rule 2830 and does not supersede any interpretive guidance under that rule;
clarify that personnel within a member firm are eligible to conduct the independent review and that a member be provided with flexibility to determine when a review may be necessary and how often such a review should occur;
provide more specific guidance on factors that should be considered in determining whether such persons are sufficiently qualified and clarify that members have sufficient flexibility in applying those factors;
provide guidance on the scope of records required to be maintained under the proposed recordkeeping requirement; and
clarify that the training and educating personnel requirement be clarified to relate only to personnel whose positions involve business entertainment expenses.

Related Links
A section of this website is devoted to this and other financial services issues.