Is employees' understanding of conduct risk aligned with values espoused in their employers' public statements?

Abstract

The purpose of this paper is to examine whether there is any correlation between the values expressed in the published statements of investment firms and their employees' understanding of conduct risk. A qualitative examination of: (a) 20 semi-structured interviews, comprising 17 with employees from nine UK firms engaged in brokerage and trading activities, and three interviews with consultants specialising in conduct risk who regularly assist such firms; and (b) the publicly available statements issued by nine UK firms engaged in brokerage and trading activities. The paper finds much alignment between firms' publicly stated values and their employees' understanding of conduct risk. However, some themes that are currently high on the UK Financial Conduct Authority's (FCA) agenda, such as non-financial misconduct and transparency, receive little to no attention in either. The study's findings are limited to the insights of the interviewees who took part. These insights may not represent ‘what actually happens' on the trading floor. For this, an ethnographic study would be required. The findings imply that current conduct-related initiatives led by the FCA are not making a significant impact on brokerage and trading firms. This paper builds on a previous study that examines possible relationships between banks' corporate value statements and incidences of misconduct. Furthermore, it proposes the piloting of a conduct risk awareness programme that utilises the experiences of former miscreants to help embed cultural change.

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ORCID for Alexander Culley: orcid.org/0000-0002-0560-9443

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