The Financial Industry Regulatory Authority, which regulates American securities brokers, has launched a review into what it says is “how firms establish, communicate and implement cultural values, and whether cultural values are guiding business conduct” at the companies in question.
FINRA is also interested in knowing how companies identify those of their employees who “breach” company policy, and “what efforts are used to promptly address” such breaches, as well as how their compensation practices “reinforce” their cultural values, the text of a document sent to an undisclosed number of companies last week reveals.
FINRA has asked the companies it’s surveying to reply by 21 March. After this date, it said, “we plan to meet with executive business, compliance, legal and risk management staff…to discuss cultural values”.
In its annual Regulatory and Examination Priorities Letter on 5 January, outlining its priorities for the year ahead, the authority – Wall Street’s self-regulating body – said “firm culture, ethics and conflicts of interest” remained a “top priority”.
Last year, according to press reports, FINRA sent a similar letter to brokerage firms asking them about potential conflicts in how they paid their brokers for their services, evidently interested in the matter of commissions, and whether these might be influencing outcomes in ways that weren’t in the best interest of their clients.
FINRA said the information it’s gathering this year will help it to develop potential guidance for the industry, while also enabling it to determine what, if any, other steps might need to be taken.
FINRA was founded in 2007, by the consolidation of a number of pre-existing regulatory entities, and is based in Washington, DC.