Gifts and Gratuities

Advisory representatives are prohibited from accepting anything of value that might influence their investment decisions or serve to reward them in connection with their investment advisory activities. Additionally, advisory representatives are expected to refrain from knowingly conducting advisory business with any individuals or entities that use gifts, gratuities, or other items of value to bribe or influence others.

The provision and receipt of gifts and business entertainment by investment advisers and their employees are subject to pervasive regulation. Firms are to supervise and document all gifts and gratuities given to or received from any clients and prospective clients. The rule protects against the improprieties that may arise when firms or their associated persons gives gifts or gratuities. Firms must take any action to identify or examine the nature, frequency, extent and dollar amount to determine if such gifts and/or gratuities are in compliance with the firm’s policies. RIA’s are to adopt a policy governing professional conduct and conflicts of interest. Such policy is to provide that all associated persons have high standards of performance, integrity, productivity and professionalism. The firm should monitor for any and all conflicts of interest that could result, including instances of preferential treatment over other clients.

Controls

Firms must have controls in place requiring all associated persons to report gifts and gratuities. They should also maintain a gifts log containing any such entries.

Surveillance

Firms need to develop and implement policies and procedures for surveillance and/or sampling. Examples of surveillance include keyword searches in email review and attestations signed by each representative. In an effort to establish reasonable controls to achieve compliance, it is recommended that the firm send all covered persons a reminder related to reporting gifts and gratuities.

For more details on what qualifies as a gift and the monetary thresholds, check out the SEC’s Code Of Ethics for Investment Advisors.

For more blogs on investment advisors, check out:

• Form ADV
• Outside Business Activities for RIAs
• What Should an RIA’s Training Plan Cover?

MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us.