Regulatory Action & Its Effects on Reputational Risk Management

This year’s Global Compliance Survey (GCS) results include responses from 150+ experienced personnel serving directly in financial services compliance roles. Analyzed in aggregate, these results provide a statistical assessment of the perceptions and state of compliance departments across the globe. They provide both a point-in-time analysis of current compliance and surveillance-related issues, as well as trend analysis of how issues have emerged and evolved over the last six years since Nasdaq began this annual survey.

This year is characterized by increased regulatory action. The SEC’S Division of Enforcement has markedly increased its pursuit of investigations and enforcement actions in the area of market manipulation and insider trading.

In 2021, FINRA invested $37.6 million in several initiatives to enhance various tools and systems used for examinations, investigations, and disciplinary programs. Of the overall investment, $11.4 million went directly to modernize and enhance the systems and tools supporting enforcement investigations and disposition processes. 

The FCA recently noted a significant increase in firm-reported suspicions of market abuse, “We received over 90 reports a week last year, and the number sent increased by almost 15% on 2020.” The FCA defines these reports as Suspicious Transaction and Order Reports sent by market participants who have ‘reasonable grounds’ to suspect market abuse.

As defined by the Federal Reserve, reputational risk is the potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions.

The survey shows that a substantial number of firms are now maintaining distinct reputational risk management policies and resources – 77% of firms reporting this structure in 2021, compared to 63% in 2019.

This showcases the importance firms continue to place on reputational risk management – which has been a top concern for compliance practitioners since the start of Nasdaq’s GCS in 2015. Nearly 80% of survey participants assert that their firms promote a firm-wide culture of proactive compliance. 

Nasdaq Trade Surveillance helps manage reputational risk, maintain regulatory standards and reduce operational complexity. Firms can protect and prevent reputational damage associated with market manipulation by efficiently monitoring anomalous trading patterns while streamlining processes.

Download the full report for complete insights and access to all the GCS data, graphs, and charts.


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