From the perspective of financial services regulation, the concept of company culture seems like a squishy thing that’s hard to measure, gauge, evaluate––and certainly, regulate. But it’s an emphases this year at the Financial Industry Regulatory Authority, which included culture as part of its regulatory and examinations priority letter in early January and made it the focus of a sweep letter sent to more than a dozen unidentified firms in mid-February.

In that letter, the brokerage industry regulator asked recipient firms to address eight points pertaining to their culture, and to submit replies to Finra by March 21.

A Finra spokesperson wouldn’t comment on what Finra’s next step in this process will be, other than to say that in addition to the letter a culture review will be included in some other examinations.

Which leads to the question: How do you define company culture?

“It’s like the Supreme Court case from years ago: can’t define it but I know it when I see it,” says Mitch Kraskin, CEO of Compliance Science, a New York City-based compliance specialist. He is referring to the famous “I know it when I see it” characterization of pornography attributed to U.S. Supreme Court Justice Potter Stewart a half-century ago.

“I think what Finra and the SEC are grappling with is you can have a whole bunch of rules in place that cover how people behave within an organization and with clients, but that’s different from culture,” Kraskin says. “Rules are rules, but culture is this broader topic."

"From a cultural standpoint, ethics and honesty is driven from the top. That’s the tone of the firm, that’s how you encourage your employees to conduct themselves when it comes to the business,” he adds.

Hardy Callcott, a partner at law firm Sidley Austin LLP’s office in San Francisco and whose practice focuses on regulatory issues in the financial services industry, notes that Finra did a report in 2013 on conflicts of interest, and that was after doing some targeted reviews.

“I suspect they’re aiming toward something like that here,” he says. “They need to get some benchmarking information, and eventually it will probably be something they look at across the industry.”

In its letter to broker-dealers, Finra said fines and litigation costs incurred by firms––or their parent companies––stemming from cultural failures were estimated at more than $300 billion since 2010. That fact, the regulator said, emphasizes the need for firms to establish and implement strong cultural values.