The Financial Industry Regulatory Authority said it would examine the "firm culture" at Wall Street brokerages and the factors that influence them.
Finra is concerned about how brokerages take actions to promote fair and ethical treatment of customers and help mitigate conflicts of interest, the watchdog said in its "2016 examination of U.S. brokerages" report released on Tuesday.
The Wall Street's industry-funded watchdog said it would mainly assess five indicators of a firm's culture and the role they play in the way brokerages conduct business.
The indicators include the handling of policy or control breaches, departments or trading desks that might not conform to the corporate culture and the role of senior executives in a firm's culture.
Finra said it would not dictate a specific culture for brokerages, but rather understand how each firm's culture affects compliance and risk management practices.
Finra routinely examines the industry's more than 4,100 securities firms to gauge their compliance with securities industry rules.
The watchdog also said it would complete the review started in late 2015 over broker incentives and conflicts of interest in the broker-dealer industry.
Finra launched the review in October following concerns that certain financial incentives, including commission-based compensation to brokers, could lead to promotions of products that may not be the best choice for investors.
"Nearly a decade after the financial crisis, some firms continue to experience systemic breakdowns manifested through significant violations due to poor cultures of compliance," FINRA Chief Executive Richard Ketchum said in a statement.
Finra To Examine 'Firm Culture' In Wall Street Brokerages
January 5, 2016
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It's amazing how people who have never been in the business are able to judge how others operate. I would like them to examine "regulators" cultures, that is what makes them operate how they do. They take the view they know best yet they have never worked in the business they are regulating. A classic example - the position that "the cheapest way is the best way. All actions should be done on the cheapest manner possible." Ok, do you want the cheapest doctor when your sick? Do you want the cheapest attorney when facing jail? Do you want the cheapest car when you get in an accident? There's a reason there is everything from Yugo's to Mercedes. Both perform the same function - moving from point A to point B, but in case of problems, most would rather be in the Mercedes than the Yugo. If they can guarantee there will never be any problems, and all things are truly the same, then cheapest may work. But in the real world where problems come up daily and where quality makes a major difference, "cheapest" is the kiss of death. Then again, facts never changed a government agency!