Conduct Risk Management and Surveillance 

Our Conduct Risk Management and Surveillance practice helps financial institutions mitigate conduct risk and maintain the highest ethical standards through our comprehensive consulting and surveillance services. We understand the complex regulatory environment and evolving industry challenges, and we work closely with your team to create a customized solution that protects your reputation and fosters a culture of integrity. 

The landscape for surveillance programs is changing as firms seek to manage new requirements, new levels of scrutiny, and new technologies more effectively. The key trends in the conduct and surveillance space present challenges and opportunities for financial institutions, including: 

• Increased regulatory scrutiny and higher fines – The SEC has assessed over $2B in E-Communications fines in the last two years, driven by financial institutions’ inability to prevent their covered associates from using unapproved channels for business-related client communications. 
• Advanced technology capabilities and AI – Advancements in Machine Learning (ML) and other advanced analytic capabilities allow firms to materially reduce the number of false positive alerts, reducing the amount of human labor needed to adjudicate these events. 
• The proliferation of communication interaction channels – New communication channels are emerging continuously, forcing firms to monitor what platforms are being used constantly and for what purpose. Also, the line between personal and business channels is blurring.  
• Digitization of interaction and critical business workflows – As more client interaction and transaction activity is conducted via electronic channels, the volume of available data to monitor and assess grows exponentially. 
• Increased pressure to reduce the cost of compliance – Firms have made tremendous investments in compliance capabilities (people, process, and technology), driving up the cost of participating in the markets and materially reducing their return on invested capital. 
• Opportunity to use compliance-related investments to create more business value – Firms can use the data captured for surveillance to understand their client’s needs better, allowing for more relevant products, services, and pricing. 

There has never been a better time for institutions to rethink their approach to conducting management and surveillance to maximize the total value of their risk and compliance investments. By investing in the right resources and implementing best practices, capital markets firms can build effective trade surveillance programs that protect market integrity, safeguard investors, and promote fair and orderly markets. 

Our Services – Institutions need help designing and implementing effective surveillance programs that bridge the gap between regulatory expectations across jurisdictions and market and business conventions in different geographies. 

 Conduct Risk Management – Conduct risk encompasses the potential for financial institutions to suffer harm due to employee misconduct, inappropriate sales practices, or breaches of compliance regulations. These risks can lead to significant financial losses, reputational damage, and regulatory sanctions. 

• Conduct Risk and Compliance Assessments: We identify and assess potential misconduct risks across your organization, including employee behavior, product sales practices, and market manipulation. 
• Policy and Procedure Development: We develop and implement clear policies and procedures that comply with regulatory requirements and promote ethical behavior. 
• Training and Awareness Programs: We design and deliver effective training programs to educate employees on their conduct obligations and equip them to identify and report potential misconduct. 
• Culture Assessments: We evaluate your organization’s culture to identify potential areas for improvement and foster a culture of fairness, transparency, and accountability. 

Surveillance – An effective surveillance program is a critical component of a bank’s ability to meet its conduct risk management obligations. The key to effective surveillance is focusing on activities and actions most indicative of non-compliance, reducing the noise and aggravation created by erroneous signals. 

• Transaction Monitoring: We help implement robust transaction monitoring systems, including UI/UX design, requirements analysis, project and program management, testing, and change management. 
• Behavioral Monitoring: We leverage advanced analytics and artificial intelligence to analyze employee behavior and communications to identify potential misconduct early on. 
• Market Abuse Surveillance: We monitor market activity for signs of manipulative or abusive trading practices. 
• Investigations: We conduct thorough investigations into suspected misconduct to identify the root cause and recommend appropriate disciplinary action. 

Several regulations require capital markets firms to record and surveil activity linked to clients, including orders, trades, communications, and payments. Significant overlap exists in the information, people, processes, and tools used to meet surveillance and reporting obligations. 

Benefits of Working with Us – We understand that addressing these challenges effectively requires a comprehensive approach, combining advanced technology, skilled personnel, and a strong commitment to compliance. 

• Experienced Team: Our team consists of seasoned professionals with deep expertise in conduct risk management and surveillance. 
• Customized Solutions: We tailor our services to your needs and risk profile. 
• Technology-Driven Approach: We leverage advanced technology, including advanced analytics, cross-platform workflow, and artificial intelligence, to automate processes and improve efficiency. 

• Regulatory Compliance: We ensure your compliance with all relevant regulations and industry best practices. 
• Improved Reputation: Proactive conduct risk management protects your reputation and builds stakeholder trust.