Leveraging RegTech to Eliminate Conduct Risk Blind Spots


"Without the ability to centrally manage conduct risk data, even leading firms that pride themselves on promoting cultures of compliance can easily overlook misconduct that could have been curtailed."

This blog post is an excerpt from a LegalTech News article, written by CEO, Brian Fahey. 

Conduct risk is a form of business risk that refers to potential misconduct of individuals associated with a firm, including employees, third-party vendors, customers or agents interacting with the firm.

Conduct risk is typically associated with human misbehavior, unlike many other forms of business risk, such as a major network outage caused by systemic failure. Conduct risk poses a growing threat to companies across industries and jurisdictions because regulators are increasingly holding senior managers accountable for the actions of individuals associated with a firm.

Regulators are making conduct risk a top examination and enforcement priority. For instance, U.S. Securities and Exchange Commission (SEC) Rule 204A-1 under the Advisers Act (the “Code of Ethics Rule”), which requires registrants to establish a standard of business conduct of all supervised persons, was one of the top areas of deficiency the agency identified in 2017. The U.K. Financial Conduct Authority (FCA) is now expanding its Senior Managers and Certification Regime (SMCR) to hold more individuals across a broader base of financial institutions accountable for their conduct.  Read the rest of the article on LegalTech News here 

Not a LegalTech News subscriber? Check out our related, free whitepaper, What is Conduct Risk and How Can Technology Mitigate it? 

This whitepaper covers topics including: 

  • Background of conduct risk as top regulatory enforcement priority 
  • Three of the most common conduct risk scenarios
  • How recent advances in regtech can mitigate conduct risk