Regulators’ increased focus on ensuring that dealers act in clients’ best interests is starting to be felt in traditional wholesale markets, says a new report from Greenwich Associates.

According to the report, players in the fixed-income, currency and commodities (FICC) markets are seeing the effects of a new regulatory emphasis on tightening standards of conduct. While these markets have traditionally worked on the assumption that participants are sophisticated professionals in little need of investor protection, Greenwich notes that recent efforts in the U.S. and the U.K. in particular are changing that view and raising expectations for dealer conduct.

“These actions have captured the full attention of senior management at sell-side firms, as regulators globally, and especially in the U.K., seek to hold senior management personally liable for the behavior of the staff in their organization,” Greenwich notes.

To address these issues, firms need to establish a culture of compliance, and that this inevitably starts at the top of the organization, the report says.

“It is neither practical nor desirable to have a compliance officer watching over the shoulder of every employee all the time,” says Greenwich Associates consultant Thomas Jacques. “Firms need to foster a strong culture, based on a set of clearly defined values and principles, ensuring that their workforce understands and embraces these values and integrates them into everything they do on behalf of their firm.”

Responsibility for nurturing this sort of culture starts with a firm’s board, which has a duty to ensure it is transmitted throughout the organization, the report says.

“An effective way to ensure culture remains strong is to measure conduct based on objective feedback from clients, as demonstrating good conduct will not only reduce regulatory risk, but will be an important differentiator when competing for client business,” it says.

“Sell-side firms are concluding that developing a reputation for the highest standards of conduct is a good way to win business,” Jacques says.