THE banking watchdog has warned businessmen to stay off the golf course – claiming that playing the game with clients could create a “conflict of interest”.
Golf has long been considered the sport of business – with deals forged and broken on the leisurely strolls between holes at luxury resorts.
But the Financial Conduct Authority (FCA) has said that banking bosses should stop lavishing their partners with impressive wining, dining, and sports events – including golf.
According to the watchdog playing golf is “not conducive to business discussions”, does not improve the work of the firm for investors, and could even result in business being offered in return for perks.
The FCA published their findings on these “conflicts of interest” in a new review of banking activity from 2015.
In rules published in 2014 the FCA said they would crack down on financiers offering social events and gifts in attempts to win business.
At the time they said that such gifts and social events “could have led to a channelling of business” to those who offered them to partners.
But it seems that the culture of impressing business partners with golf and other sports activities has continued.
In this year’s review they wrote: “Hospitality provided or received did not always appear to be designed to enhance the quality of service to the client.
“Individuals from firms had participated in or spectated at sporting or social events, eg. golf, tennis, concerts.
“These benefits did not appear capable of enhancing the quality of service to clients as they were either not conducive to business discussions or the discussions could better take place without these activities.”
In response to this, they said they would expect firms to better evaluate exactly what benefit such activities would have to investors.
In another portion of the report they point to golf again, saying it is often tacked on as a perk to professional training events.
They say: “Hospitality that is not designed to enhance the quality of service to clients is offered in connection with other benefits that do meet the requirements.
“There were instances of sporting activities like playing golf or attending rugby games provided after participation in training events.”
In response they said they now expect banks to consider the events separate.
They write: “Where an activity or event provides a number of non-monetary benefits, you must consider each benefit separately.
“Just because one benefit provided by the firm is designed to enhance the quality of service to a client and is capable of being paid or received without breaching the client’s best interest rule does not mean that another benefit (that does not meet these requirements) can be included in or alongside the compliant activity or event.”
The report also said that bankers were bad at keeping records of what hospitality events had been laid on – and how they were supposed to benefit clients.
But the news was not welcomed by all.
James Budden – director of marketing and distribution at Edinburgh asset management firm Baillie Gifford – said spending time with business partners was “a good idea that benefits everyone in the business chain”.
He added: “It just builds useful relationships and ultimately benefits the end client.”
But Dan Mannix, chief executive of investment fund RWC said the previous findings of the FCA had already “massively impacted” the banking’s use of “corporate entertainment”.
And, he said: “[The] whole industry has recognised there needs to be greater consideration given to what could be construed as excessive.”
