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It's better to give than to receive

www.breakingviews.com

Every businessman butters up clients. But when does buttering up cross the border into bribery? That's something securities regulators in the US are trying to determine in a probe of entertainment and gifts offered by brokerage firms to mutual fund managers. The National Association of Securities Dealers and SEC are said to be questioning whether brokers treated fund managers with overly lavish gifts and other diversions in return for business. Do they need to ask?

Sure, existing regulations prohibit brokers from lavishing customers with gifts valued at more than $100. But the rules regarding entertainment are less clear-cut. Although it is certainly not proper etiquette any more to whip out the corporate Amex at the Scores adult entertainment emporium, is it OK to offer a ride on the company Gulfstream for a night out at the Superbowl? Probably not, but it is a question of judgment.

And that is the fundamental point that should not be ignored in this latest conflict-of-interest probe. Those who deal with Wall Street must be fully aware that brokers will do their damnedest to keep favoured clients warm – not unlike the local butcher who hands every customer's kid a lollipop.

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