A survey of 450 financial services firms has determined that despite the fact a majority of them have a written gift and entertainment policy, about one-third of those firms don't measure compliance with those policies.

The 2007 Investment Management Compliance Testing Survey, conducted by Investment Advisor magazine, was released in September. While 35 percent of firms with gift and entertainment policies haven't tested the extent to which these policies are complied with, the survey did find that 16 percent prohibited gifts and/or entertainment altogether. At most of the firms surveyed (70 percent), the gift and entertainment policy was part of a broader code of ethics.

About half the firms (49 percent) keep gift and entertainment logs, and 31 percent review them as part of the compliance process. Other methods of determining gift and entertainment policy compliance included interviewing employees about their understanding of gift and entertainment policies (25 percent); reviewing patterns of gift and entertainment activity by employees (12 percent); reviewing gift and entertainment patterns over time by vendor/client (9 percent); reviewing patterns of brokerage order flow versus gifts and entertainment received from brokers (6 percent); and monitoring e-mails to determine whether employees received undisclosed gifts and entertainment (5 percent).

The survey also found that a large majority of firms (70 percent) are most concerned about the value of gifts received by employees—70 percent put dollar limits on the value of gifts employees can receive. However, these firms are more flexible when it comes to business entertainment—73 percent have no dollar limits concerning the dollar value of entertainment their employees provided, while 62 percent put no limits on the value of entertainment they received.

Fifty percent of the firms surveyed don't require pre-approval of gifts and entertainment received, while 9 percent require all gifts and entertainment received to be pre-approved. A further 29 percent required pre-approval of gifts and entertainment if the value surpasses a threshold amount.