These days, it is not enough for companies with dealings with government officials to adopt election and political law compliance policies. They need to adopt the right policies.
A $200,000 settlement the Financial Industry Regulatory Authority recently obtained against L.J. Hart & Co. (“Hart”), a Missouri municipal-bond underwriter, is a case in point. The case involved allegations that Hart handed out free tickets to professional football, baseball, and hockey games to local Missouri officials involved in issuing securities. Under rules adopted by the Municipal Securities Rulemaking Board, occasional sporting event tickets are not necessarily prohibited as long as the recipients are “hosted” by the gift-giver. Hart’s internal policy, however, failed to catch that nuance and instead suggested that there was a blanket exception for all sporting event tickets, even if Hart employees did not attend the game. Two thousand tickets to games not attended by Hart employees later, FINRA faulted Hart for giving the tickets (in violation of MSRB rule 20) and failing to adopt adequate policies and supervisory processes to prevent such gifts (in violation of MSRB rule 27).
Here, Hart’s problems could have been avoided (or at least mitigated) had it simply adopted a more careful, fine-tuned compliance policy. This cautionary tale should therefore remind companies of the importance of ensuring their internal election and political law compliance policies are fly-specked and fully consistent with applicable law.