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City firms curb wining and dining with cap on client lunch budgets

Big financial institutions including Blackstone and Jupiter Asset Management have set strict caps on client lunches in the latest sign that the days of the City’s famously lavish wining and dining could be coming to an end.
The tradition of closing a deal over boozy lunches at expensive restaurants has been dying out for years, but a sweeping set of EU reforms known as Mifid II has forced firms to take further action so staff don’t step out of line.
As a result of the revamped rules Jupiter has recently told staff that they can splash no more than ?50 on lunch with a client and can expense no more than ?200 on each contact per year, sources told The Sunday Telegraph.
“That might sound like a lot, but if you’re hiring a private room and paying London prices, it adds up,” said one person affected by the stricter rules.
Another large investment firm, which did not want to be named, said it had also introduced a ?50 cap so that it is not at risk of breaking the so-called "inducement" rules under Mifid II, which came into force in January.
One senior banker bemoaned the fact it would be difficult to take any investors “to anything nice this summer” because of the restriction, while another City executive said top restaurants and large sporting events will be quieter than usual as firms introduce tougher limits on what they spend but also on what they can accept.
City firms curb wining and dining with cap on client lunch budgets

The City's famed lunch culture is under threat

Credit:
Reuters
Blackstone, for example, has a new rule in place requiring anyone who is going to be entertained at a cost of more than ?100 to get approval from compliance first, one source said.
Although most City firms have had entertainment policies in place for years, legal advisers say there is now more concern that generous hospitality will result in enforcement action.
“While the regulator hasn’t proposed prescriptive limits of this type, their desire to see overly generous marketing or hospitality come to an end is clear and firms are reacting accordingly,” said Linklaters’ global head of finance Michael Kent.
“Clearly it is easier in practice for firms to ensure compliance if they adopt a strict financial limit though I doubt all will take exactly the same approach on this.”  
However, Simon Culhane, the chief executive of The Chartered Institute for Securities & Investment, said he is concerned putting limits on lunch expenses is too simplistic.
“The main principle is to avoid undue influence, so a more flexible  approach is needed,” he said.
“A well-paid CEO is less likely to feel obligated to a client for any reasonable lunch, no matter if it costs ?10 or ?100 because in terms of his or her lifestyle, it’s not particularly special. The same may not hold for a very junior employee who might feel ‘in debt’ for a much smaller-value lunch.”
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