The Financial Industry Regulatory Authority (FINRA), the largest self-regulatory organization in the securities industry in the United States, has brought culture into focus in its recent announcement formalizing its assessment of firm culture.
With regulatory authorities across the region already poring over culture, why is this important? While FINRA has stated that its goal is to better understand industry practices to develop potential guidance and determine next steps in this area, firms will want to make sure that they are not behind the pack and should also take this opportunity to influence the debate and help shape FINRA’s thinking.
To assess whether firms are able to effectively establish, communicate and implement cultural values, FINRA is asking firms to describe how they assess and measure the impact of cultural values, the processes they use to identify policy breaches and how they deal with them, and the cultural value criteria firms use to determine promotions, compensation or rewards.
There is still a long way to go on the journey to cultural maturity so the information requested for FINRA’s assessment should alone prompt a number of questions from senior management of firms:
While all firms will answer the above differently, FINRA will be looking closely to identify best practice and also call out behaviours that undermine effective culture. It remains to be seen whether FINRA will be able to articulate ‘what good looks like’ but what is clear is that regulatory and market interest in culture is here to stay.
Further insights can be found in Evolving Banking Regulation – Culture and Conduct.