SIA Asks For Flexibility In Entertainment Rules

TheSecurities Industry Associationis calling for theNASDand theNew York Stock Exchangeto allow broker/dealers to set their own criteria for implementing and tracking business entertainment expenses for their clients. The SIA is asking that the regulators only hold B/Ds accountable to track expenses from accredited investors who are managing other people's money. In addition, fund representatives not acting on behalf of individual investors should not be subject to the rules, the SIA argued Tuesday in a pair of identical comment letters sent to both regulators. Those provisions would substantially reduce the scope of paperwork involved with tracking entertainment expenses, the SIA said.

Requiring B/Ds to disclose upon request their lists of expenses paid for employees of customers, a provision in both regulators' rules, could reveal business strategies, the SIA argued, adding that firms should be entitled to set limits on who gets what information and how much they will get. The SIA stated that regulators should clarify to what extent the firm is responsible for what a client would consider appropriate. "Firms cannot--nor are they in a position to--ensure that the customer representative's conduct is consistent with the best interests of...the client," the SIA said.

The SIA asked regulators to allow time to fully implement the programs properly because many of the systems for tracking expenses will depend on vendors, of which it said there is a shortage (CR, 2/20). "The ability to revise or consolidate systems in the near term may be limited, at best, in many circumstances," the SIA said. Calls to SIA, NASD and NYSE spokespersons were not returned by press time.