All Broker Related Articles

Strengthening Governance Frameworks to Mitigate Misconduct Risk: A Toolkit for Firms and Supervisors

Strengthening Governance Frameworks to Mitigate Misconduct Risk: A Toolkit for Firms and Supervisors

This report, from the FSB, provides a toolkit that firms and supervisors can use to mitigate misconduct risk. The toolkit completes an important element of the workplan announced by the FSB in 2015 to develop measures to reduce misconduct risk. The FSB’s work in this area follows widespread misconduct in the financial sector including the manipulation of wholesale markets and retail misselling. Such misconduct in the financial sector on a broad scale creates mistrust, weakening the ability of the markets to allocate capital to the real economy, which in turn may give rise to systemic risks. Mitigating misconduct risk requires a multifaceted approach. The toolkit identifies 19 tools that firms and supervisors could use to address three overarching issues identified by the FSB as part of its earlier work on misconduct, namely:

  • Mitigating cultural drivers of misconduct – including tools to effectively develop and communicate strategies for reducing misconduct in firms and for authorities to effectively supervise such approaches.
  • Strengthening individual responsibility and accountability – including tools that seek to identify key responsibilities and functions in a firm and assign them to individuals to promote accountability and increase transparency.
  • Addressing the “rolling bad apples” phenomenon – including tools to improve interview processes and onboarding of new employees and for regular updates to background checks to avoid hiring individuals with a history of misconduct.
The toolkit provides a set of options based on the shared experience and diversity of perspective of FSB members in dealing with misconduct issues. The report can be viewed HERE