Mutual fund companies may soon find the small, and sometimes not so small, perks from brokerage houses run dry.
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, and 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, 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 the Journal, these gifts can sometimes get out of hand. One Jefferies Group trader shelled out $10,000 worth of expensive wine to his counterparts at Fidelity Investments, WSJ reports.
And as MME reports in this Monday's edition (see "Fidelity Gift Probe reaches Executive Suite"), the SEC is now looking into tickets to the 2002 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.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.