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FRM Part II · FRM Exam Part II · Case Study: Investor Protection and Compliance Risks in Investment Activities

After a regulatory fine for mis-selling, a firm's board must design a remediation programme. Which action is the most appropriate first step to quantify the scope of client harm?

The appropriate first step is a look-back review of sales over the relevant period. It identifies every affected client, not just those who complained, and lets the firm calculate redress consistently. Relying on complaints alone understates harm, and staffing or budget changes do not measure the scope of the problem.

  1. AConduct a look-back review of affected sales over the relevant period to identify impacted clients and calculate redressCorrect
  2. BReduce the compliance budget to offset the fine
  3. CReplace the sales team without reviewing past transactions
  4. DIssue a public statement and review only complaints already received

Explanation

A look-back review identifies all clients affected, not just those who complained, and allows redress to be calculated consistently. Relying only on complaints understates harm, and personnel changes or budget cuts do not size the problem.

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