New Regulation to Make Financial Service Firms More Accountable? Count on It.

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If you’re part of the financial services industry, you’re likely aware that a number of new regulations have been introduced recently, both in the United States as well as in the United Kingdom.

However, given the global nature of the financial services industry, these rules effectively create new, binding requirements for many companies in this sector, regardless of where they are based.

We have previously discussed FINRA Rule 3110, which came into effect in the United States at the beginning of July. This rule requires FINRA member firms to strengthen their background screening programs. You can learn more about Rule 3110 by downloading our FINRA primer.

In addition, regulatory authorities under the supervision of the Bank of England have now published (but not yet enacted) their final rules to help “make the banking sector more accountable.”

Specifically, the rules are intended to create an aura of personal accountability within the culture of banking to help avoid future misconduct. Provisions of the rules include a Senior Manager Regime, a Certification Regime and a set of Conduct Rules.

The common thread among these two independently devised sets of rules that span an ocean is that they are intended to mitigate risk in the banking sector and help create more accountability among firms and individuals.

Interestingly, in both cases, an emphasis on a firm’s responsibility to vet and assess their candidates, which generally includes expanded background screening, forms a key component of the rules.

While we intend to further analyze these rules and contemplate their impact to our customers, I speculate that regulators believe that an assessment of past behavior is a viable tool to assess potential future risk to the organization and its clients. HireRight’s own data seems to support this notion.

Our 2015 annual benchmarking survey indicates that 86% of companies have found lies or misrepresentations on applications and, within the financial services industry, an astonishing 92% indicated that background screening has identified issues that may not otherwise have been caught.

Clearly there is a general belief that an enhanced background screening program can help assess truthfulness and mitigate hiring individuals who may put the firm at risk.

Look to this page for future, in-depth analysis and additional education on this topic. In the meantime, I’d love to your thoughts on this topic. Do you believe that enhanced screening can help mitigate risk?

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Abdul Rastagar

I lead the Product Marketing team at HireRight. I am a customer advocate, digital and future enthusiast, technologist, and all around curious guy.

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