Banking · Financial Risk Management
A prominent private sector bank is reviewing its operational and compliance framework. The bank acts as a Corporate Agent for multiple insurance companies. The board is considering switching to an Insurance Brokerage license. Meanwhile, its Wealth Management division faces a SEBI investigation because relationship managers received unauthorized 'Referral Fees' in personal accounts for diverting client funds. Concurrently, the Factoring department reports high defaults in its Non-Recourse portfolio, and the bank has a large exposure as a Debenture Trustee for a firm undergoing corporate insolvency resolution process under the IBC. Which of the following represents the most critical threat to the bank's fiduciary compliance and internal control integrity?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The factoring defaults due to systemic sectoral crisis.
- 2The SEBI investigation into personal referrals, indicating a breakdown of internal controls and fiduciary duty.✓
- 3The planned switch to an insurance brokerage license.
- 4The exposure as a Debenture Trustee requiring payout from bank's own capital.
Correct answer
The SEBI investigation into personal referrals, indicating a breakdown of internal controls and fiduciary duty.
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