AI mis-frames CPMI-IOSCO d226 effective practices as supervisory or mandatory obligations when the report itself describes them as non-binding examples of how PFMI standards can be met.
Executive Summary
Company secretaries supporting CCP boards, clearing member boards, and clearing-house-affiliated holding companies are increasingly using AI to draft Audit and Risk Committee agenda items on d226, prepare board minutes that record the directors' position on CPMI-IOSCO recommendations, draft regulator-correspondence templates referencing the January 2025 publication, and validate disclosure language for annual reports that mention international standard setters. Leading AI assistants tested by the RLB Specialist Panel produced confident, citable answers on the binding force of d226 that the document itself directly contradicts.
This cell collects one hallucination finding on the January 2025 CPMI-IOSCO publication "Streamlining variation margin in centrally cleared markets, examples of effective practices" (d226), organised for company secretaries working on CPMI-IOSCO VM matters in international and cross-border contexts. Across the finding, the AI subject in this audit produced a confident, citable response on the legal status of the eight effective practices in d226 that the document itself directly contradicts.
The Specialist Panel found that the AI classified each practice as a supervisory expectation or as carrying mandatory overlap with national rules, when the document's own stated purpose paragraph records it as "examples of how standards set out in the CPMI-IOSCO Principles for financial market infrastructures, as supplemented by the relevant guidance, can be met." Every finding in this cell is bound to verbatim regulator-issued source text held as primary substrate by the RLB Specialist Panel.
When this affects company secretaries work
This pattern surfaces whenever company secretaries use AI to characterise the binding force of d226 in board agenda items, audit and risk committee briefing notes, and regulator-facing minute extracts. The risk is structural: d226 is a CPMI-IOSCO publication that frames itself as voluntary effective-practice illustration, yet the AI's commitment reads as a supervisory or mandatory classification that a practitioner would paste into a deliverable before verification against the source. The deliverable then carries forward an inverted modality on binding force into downstream work products.
Findings overview
| # | Finding title | Type | Citation ID |
|---|---|---|---|
| 1 | Inverted modality on binding force | Misstated rule | RLB-H-INT-BIS-CPMI-CPMI-IOSCO-VARIATION-MARGIN-CCPs-2025-Q004-Opus47 |
What the AI got wrong
Finding 1: Inverted modality on binding force of d226 effective practices
Citation ID: RLB-H-INT-BIS-CPMI-CPMI-IOSCO-VARIATION-MARGIN-CCPs-2025-Q004-Opus47
In response to a Specialist Panel application-style question asking for a compliance obligations memo classifying each of the eight effective practices in d226 as either (A) MANDATORY REQUIREMENT, (B) SUPERVISORY EXPECTATION, or (C) VOLUNTARY GUIDANCE, the AI subject produced a complete memo that treated every one of the eight effective practices as either a supervisory expectation in its own right or as overlapping with mandatory national rules.
The memo opened with a threshold classification that placed d226 in category (C) but immediately added "a strong gravitational pull into (B) SUPERVISORY EXPECTATION because the underlying PFMIs are the de facto binding standard against which CCPs are supervised," then classified each practice individually under (B), (B) trending (C), (B) with (A) elements, or similar mixed labels.
The document's own stated purpose paragraph, by contrast, records that d226 sets out "examples of how standards set out in the CPMI-IOSCO Principles for financial market infrastructures, as supplemented by the relevant guidance, can be met." The text is illustrative of one way the underlying PFMI standards can be met, and is not a new layer of supervisory expectation or mandatory rule. The AI subject's framing inverts that modality: it converts a voluntary illustration into a baseline supervisory expectation, with each practice acquiring its own binding-force overlay.
The Specialist Panel records this as a misstated-rule finding because the AI's commitment on the legal status of d226 contradicts the document's own characterisation of itself. The full finding analysis, including the verbatim regulator text, the AI subject's complete answer, and the AI's failure mode classification, is at See full finding analysis.
Board agenda items and committee briefing notes that present d226 effective practices as supervisory or mandatory obligations distort the directors' adoption decisions, create misleading minute records that may later be reviewed by national supervisors, and risk drawing the board into an over-implementation posture relative to the document's own voluntary framing.
AI's failure mode
| # | Finding title | Type | Citation ID |
|---|---|---|---|
| 1 | Inverted modality on binding force | Misstated rule | RLB-H-INT-BIS-CPMI-CPMI-IOSCO-VARIATION-MARGIN-CCPs-2025-Q004-Opus47 |
Risk impact
| # | Finding title | Type | Citation ID |
|---|---|---|---|
| 1 | Inverted modality on binding force | Misstated rule | RLB-H-INT-BIS-CPMI-CPMI-IOSCO-VARIATION-MARGIN-CCPs-2025-Q004-Opus47 |
What company secretaries teams should do
- Frame d226 in board papers as a CPMI-IOSCO publication of voluntary effective practices that illustrate one way PFMI standards can be met, not as a new layer of binding rules.
- Where the board considers adopting a specific d226 practice, capture in the minutes the directors' rationale separately from any supervisory expectation, so the record reflects a voluntary adoption decision.
- When AI-generated agenda items or briefing notes characterise d226 as supervisory, return them to the originating department for revision before circulation.
- In disclosure language for annual reports and regulator submissions, cite d226 using the document's own framing rather than AI-supplied paraphrases that may overstate binding force.
- Coordinate with general counsel and the risk function on a single house position on d226's legal status, and use that position consistently across board, regulator, and stakeholder communications.
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Source & Methodology Standards
RegLeg Brief is operated by Verdus Technologies Pte. Ltd. (UEN 201616982R), incorporated in Singapore. The RLB Specialist Panel, with an aggregate of over 60 years of public-policy and industry experience, documents only confirmed hallucination findings, under a methodology that requires a verbatim regulator excerpt for every documented claim. All findings, citation IDs, model outputs, regulator excerpts, and methodology notes are open-access.
Primary source verified: d226 — Streamlining variation margin in centrally cleared markets — examples of effective practices (January 2025). R-folder reference: R6-FINAL_REPORT-00001. BIS portal: bis.org/cpmi.
Citation IDs referenced:
RLB-H-INT-BIS-CPMI-CPMI-IOSCO-VARIATION-MARGIN-CCPs-2025-Q004-Opus47