Conduct risk within the United States financial sector

Figures & data

Figure 1. Extract from SEC enforcement actions database.

Figure 2. Extract from SEC enforcement actions document. Different misconduct events are categorised under the tailored PEST approach. The above example is from the Personnel subdomain. For present purposes the misconduct action selective disclosure is place through the Hofstede Cultural Grid.

Table 1. Hofstede cultural dimensions in relation to selective disclosure

Selective Disclosure	Description of Event
Power-Distance	Selective disclosure may remain more common in an institution where the management remains disconnected from the front line employees. The greater power-distance between management and employee may provide more of an opportunity for employees to selectively disclose information
Uncertainty Avoidance	Within an institution selective disclosure may actually be a regular practice by certain management and client facing employees, this may in time develop as an established institutional practice and so in time the uncertainty avoidance may see this practice spread as individuals may not seek to engage in the uncertain practice
Long-term versus short-term	Individuals with short-term interests or needs may be more likely to engage in selective disclosure to meet client targets or sale volumes and to achieve incentives
Individualism versus Collectivism	Both individuals and groups may engage in selective disclosures for their own benefit. But groups acting as a collective may also engage in selective disclosure where this is considered to be unauthorised but accepted conduct
Indulgence versus restraint	Selective Disclosure to a client may be an action that has management support and individuals have discretion to exercise selective disclosure where relevant. In contrast, restraint in this context would be either disclosing all relevant information to all clients or refraining from selective disclosure