As the year winds down and holiday cheer ramps up, so does the risk of compliance missteps around gifts and entertainment (G&E). Whether it’s a client lunch, a vendor gift basket, or a sponsored event, firms need to stay vigilant this time of year.
Longstanding guidance from the SEC staff outlines their expectations for how firms should manage gifts and entertainment. Firms should expect SEC examiners to scrutinize firms’ G&E practices and call out gifts or entertainment they find to be inappropriate, excessive, or otherwise out of keeping with a firm’s policies and procedures.
Investment advisers that are dually registered as broker-dealers should also take note that FINRA recently issued a fine of $10 million tied to G&E supervision failures. It’s a clear signal that regulators expect firms to have strong, enforceable policies in place, and that compliance failures can have serious consequences.
Here are five best practices to help your firm stay compliant and confident this season:
1. Refresh Training
Don’t assume everyone remembers the rules. Provide a seasonal refresher on what’s allowed under your G&E policy. Include examples of common holiday scenarios like gift cards, event invites, or vendor swag, and clarify what needs to be disclosed or approved.
2. Review Limits
Revisit your thresholds for gifts, meals, and entertainment. Are they still reasonable? Are they enforced consistently across teams and regions? If your policy includes dollar limits, make sure they’re clearly communicated and easy to track.
3. Track Everything
Documentation is key. Use a centralized system to log gifts and entertainment and consider automating approvals and flagging exceptions. The more visibility you have, the easier it is to spot issues before they escalate.
4. Audit Regularly
Don’t wait for a problem to surface. Spot-check records and approvals, especially during high-risk periods like Q4. Review electronic communications and firm ledgers for G&E to assess compliance with policies and procedures. Look for patterns and repeated gifts from the same vendor, inconsistent reporting, or missing documentation.
5. Update Policies
If your G&E policy hasn’t been reviewed in the last year, now’s the time. Make sure it reflects current business practices, regulatory expectations, and seasonal nuances.
Seasonal Generosity, Year-Round Integrity
The holidays are a time for giving, but in regulated industries, not every gift is welcome. A festive gesture can quickly turn into a compliance headache if the intent isn’t clear or the value crosses a line. Before giving or accepting anything this season, ask:
- Is the gift appropriate for the occasion?
- Is it reasonable in value?
- Is it tied to a pending deal?
- Does it exceed firm or regulatory limits?
If the gift is meant to influence, reward, or create an expectation of business, it’s likely a problem. Even well-meaning gestures can create the appearance of impropriety, especially in today’s regulatory climate.
Closing Out the Year with Confidence
G&E compliance isn’t just about avoiding fines; it’s about protecting your firm’s reputation and maintaining trust. A quick policy refresh and seasonal training can go a long way in reducing risk and reinforcing a culture of compliance.
Need Help Wrapping Up G&E Risk?
ACA helps firms manage gifts and entertainment oversight with services built for investment advisers and investment companies. Our team supports your compliance program with practical tools and expert guidance. Whether you’re reviewing procedures or preparing for Q1, we’ll help you close out the year with confidence.