A Mistake of Epic Proportions

The importance of proper governance under current environment isn’t emphasized enough upon. In a world that is witnessing such a tight competition across all the major sectors, certain issues become almost unavoidable. Nevertheless, sector-oriented governance does more than just straightening up the wrinkles. While the central government ensures that every major sector is versatile enough to accommodate organizations of all sizes, the financial advantage that big companies have over small ones can still be felt at times. Therefore, regulatory bodies take care of the fact that smaller organizations aren’t outmuscled to a point where recovering becomes somewhat impossible. Then we see the right and wrong ways of doing work entering the picture. Solving ethical dilemmas in a socially acceptable manner make up the larger chunk of the duties expected to be carried out by regulatory bodies. We are barely inferior of cases that tell the tale of companies caving in against greed and trading their morals for a seat on the table that belongs to a higher echelon. To prevent these situations, these regulators map out a set of rules that the companies must not deviate from, otherwise it can get messy and expensive. Charles Schwab Corp would be in collective agreement of this after the company recently discovered the potential repercussions of its lapses.

Charles Schwab, an elite brokerage, banking, and financial advisory, recently announced that it is setting aside a sizeable sum of 200 million US dollars after it became clear that the company has failed to comply with Security and Exchange Commission’s regulations regarding proper disclosure. The case relates to company’s robo-adviser platform.

Robo-advisers have been on SEC’s radar for quite a while now. Back in December of 2018, the commission accused Wealthfront Advisers LLC and one other firm that dealt in robo-driven guidance for making false statements about investments products and publishing misleading advertisements.

SEC pointed out that as per U.S. securities rules, which necessitates the firms offering advice digitally through algorithms to make a certain level of disclosure, the operations of Charles Schwab’s robo-adviser platform felt out of the line. It was a statement move by the commission as they look to bring this concept of AI-driven advisers under similar umbrella of regulations as other fintech platforms.

While the expected amount for penalty currently falls around 200 million, the company knows that it could go well above that.

Hot Topics

Related Articles