Banning corporate entertainment for advisers?
The Financial Conduct Authority (FCA) believes corporate entertainment for financial advisers by asset managers is wrong. What about other corporate entertainment? Will there be restrictions?
Businesses have of course provided entertainment of different kinds to attract new clients for decades, and it has grown in recent years with corporate entertainment packages and the like. Can the tide ever be turned by restrictions?
A top regulatory lawyer has warned the Financial Conduct Authority (FCA) could eventually ban all forms of corporate entertainment for advisers by asset managers.
At the start of the year, the FCA issued an 18-page document covering its stance on inducements and highlighting some “poor practices” it had seen in the industry which it wanted to see quashed.
It has subsequently resisted calls to provide any more clarity on the subject around what firms can and cannot pay for.
The FCA’s counterargument is that, if it provides value, then why can the adviser not pay for it themselves?
Tamara Cizeika of London law firm Allen & Overy has said she expects the FCA’s stance on this will only harden over time, and the regulator will want to stop firms from hosting corporate hospitality entirely in future.
Currently the test for whether corporate entertainment is suitable is if it is of reasonable and proportionate value, of a limited scale, and is not used in order to channel business to the firm. Asset managers have found the lack of clarity from the regulator around exactly what is allowed frustrating, but the message from Cizeika is clear. Proponents of corporate hospitality say it helps build relationships and devise better products which clients actually want.