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Culture remains high on the agenda

Culture remains high on the agenda

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.


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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:

  • Do we have a clear articulation of desired culture that all senior management are committed to?
  • How do we ensure that the ‘tone from the middle’ in word and action is consistent with the ‘tone from the top’?
  • What ‘nudges’ does our operating model (e.g. policies, procedures, practices etc.) give our staff in respect of behavior in line with cultural values?
  • What framework do we have in place to assess our progress on the culture journey and are we measuring the right things?
  • How effectively do we deal with behaviours that undermine desired cultural values and are our actions reinforcing of our desired culture?

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

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