Embraced by leading financial institutions, the Compliance Transparency Initiative represents a regulatory framework that guarantees whistleblower com...
GMAT Information and Ideas : (Ideas) Questions
Embraced by leading financial institutions, the Compliance Transparency Initiative represents a regulatory framework that guarantees whistleblower compensation whenever their disclosures of regulatory breaches result in enforcement proceedings. However, this initiative contains significant flaws. In particular, it allows financial institutions to demand that their settlement arrangements and compliance correction strategies be maintained as classified regulatory data. As a result, certain financial regulatory watchdogs express concern that this initiative might unintentionally lead to ________
Which choice most logically completes the text?
reducing the financial compensation that whistleblowers might obtain from their reports of regulatory violations.
preventing external auditors from assessing whether settlement agreements ensure adequate remediation of reported violations.
limiting the compliance training that banks conduct following whistleblower reports of regulatory violations.
discouraging whistleblowers from developing new approaches to detecting regulatory violations through bank cooperation.
Step 1: Decode and Map the Passage
Create Passage Analysis Table
| Text from Passage | Analysis |
|---|---|
| "Embraced by leading financial institutions, the Compliance Transparency Initiative represents a regulatory framework that guarantees whistleblower compensation whenever their disclosures of regulatory breaches result in enforcement proceedings." |
|
| "However, this initiative contains significant flaws." |
|
| "In particular, it allows financial institutions to demand that their settlement arrangements and compliance correction strategies be maintained as classified regulatory data." |
|
| "As a result, certain financial regulatory watchdogs express concern that this initiative might unintentionally lead to ________" |
|
Provide Passage Architecture and Core Elements
- Main Point: The Compliance Transparency Initiative, while protecting whistleblowers financially, creates concerns because it allows institutions to classify their settlement information.
- Argument Flow: The passage presents a regulatory framework with a positive feature (whistleblower protection), then pivots to reveal a significant flaw (allowing secrecy around settlements), leading to concerns about what negative consequence this secrecy might create.
Step 2: Interpret the Question Precisely
What's being asked? We need to complete the logical thought about what unintended consequence the secrecy provision might create.
What type of answer do we need? A logical inference about what problem could result from allowing settlement arrangements and compliance strategies to be kept classified.
Any limiting keywords? None specified.
Step 3: Prethink the Answer
- The key issue is that settlement arrangements and compliance correction strategies can be kept classified
- This secrecy would logically prevent outside parties from being able to review or evaluate these settlements
- The concern would be that if settlements are secret, no one external can verify whether they're actually adequate or effective
- This creates a transparency problem where the adequacy of remediation cannot be assessed by independent parties
reducing the financial compensation that whistleblowers might obtain from their reports of regulatory violations.
✗ Incorrect
- Suggests reducing whistleblower compensation
- The passage explicitly states the initiative guarantees whistleblower compensation, so this directly contradicts a stated benefit
preventing external auditors from assessing whether settlement agreements ensure adequate remediation of reported violations.
✓ Correct
- Identifies that external auditors could not assess settlement adequacy
- Directly follows from our analysis: if settlement arrangements are classified, external parties cannot review them to verify they provide adequate remediation
limiting the compliance training that banks conduct following whistleblower reports of regulatory violations.
✗ Incorrect
- Focuses on limiting compliance training
- The classified information provision does not logically connect to reducing training programs
discouraging whistleblowers from developing new approaches to detecting regulatory violations through bank cooperation.
✗ Incorrect
- About discouraging whistleblower innovation in detection methods
- The secrecy provision affects post-disclosure settlements, not the detection process itself