PFMI Principle 2 KC 6, non-executive risk-committee chair mandate fabricated
On PFMI Principle 2's Key Consideration 6, Claude Opus 4.7 with web search asserted that the board should establish "a risk committee that is chaired by a suitably qualified, non-executive member," and accompanied this with an inverted KC ordering and a misattribution of KC 5's management-roles content to internal-control requirements. The fabricated non-executive-chair mandate is the kind of high-confidence structured hallucination that an FMI board secretary or governance lead drafting a committee charter would absorb directly into the document, because the surface form looks like a PFMI self-assessment response.
The error reflects a training-weighted prior on corporate-governance committee structure (drawn from listing rules, banking-supervision codes, and conventional governance frameworks) substituted for the PFMI's framework-level KC 6 text, which speaks only to the documented risk-management framework and the independence of control functions. Verbatim paragraph probes across the Principle 2 KCs, with structured comparison against generic corporate-governance language, would directly target this class of error.
On PFMI Principle 2's Key Consideration 6, Claude Opus 4.7 with web search asserted that the board should establish "a risk committee that is chaired by a suitably qualified, non-executive member," and accompanied this with an inverted KC ordering and a misattribution of KC 5's management-roles content to internal-control requirements. The fabricated non-executive-chair mandate is the kind of high-confidence structured hallucination that an FMI board secretary or governance lead drafting a committee charter would absorb directly into the document, because the surface form looks like a PFMI self-assessment response.
The error reflects a training-weighted prior on corporate-governance committee structure (drawn from listing rules, banking-supervision codes, and conventional governance frameworks) substituted for the PFMI's framework-level KC 6 text, which speaks only to the documented risk-management framework and the independence of control functions. Verbatim paragraph probes across the Principle 2 KCs, with structured comparison against generic corporate-governance language, would directly target this class of error.
PFMI Principle 2, risk-committee recommendation misattributed to KC 5
On PFMI Principle 2, Claude Sonnet 4.6 with web search attached a soft risk-committee recommendation to Key Consideration 5: "Key Consideration 2.5 states that the board should consider establishing a risk committee with a clear mandate." KC 5 actually addresses the roles and responsibilities of management, not committee structure. The compound error, wrong KC number, fabricated quoted language, and a citation to a third-party FMI disclosure document rather than the primary PFMI source, makes the failure especially hard to detect: the citation pattern (a specific KC number with quoted text) is structurally indistinguishable from a verified citation.
The model's citation generator reached for the most accessible document that mentions PFMI rather than the authoritative source, a pattern that an alignment team could test by probing whether the model preferentially cites primary regulator portals when the verbatim text is requested versus when only a paraphrase is asked for.
On PFMI Principle 2, Claude Sonnet 4.6 with web search attached a soft risk-committee recommendation to Key Consideration 5: "Key Consideration 2.5 states that the board should consider establishing a risk committee with a clear mandate." KC 5 actually addresses the roles and responsibilities of management, not committee structure. The compound error — wrong KC number, fabricated quoted language, and a citation to a third-party FMI disclosure document rather than the primary PFMI source — makes the failure especially hard to detect: the citation pattern (a specific KC number with quoted text) is structurally indistinguishable from a verified citation.
The model's citation generator reached for the most accessible document that mentions PFMI rather than the authoritative source, a pattern that an alignment team could test by probing whether the model preferentially cites primary regulator portals when the verbatim text is requested versus when only a paraphrase is asked for.
For Company Secretaries teams drafting board charters, risk-committee terms of reference, or governance policies to PFMI standards, this output would import a fabricated non-executive-chair mandate into the documentation. The PFMI deliberately leaves committee architecture to the FMI subject to the framework-level requirements in KC 6 (documented framework, independence of control functions). A committee mandate citing KC 6 as the basis for chair composition rules will misrepresent the regulatory basis for that design choice.
Each finding has a stable Citation ID (RLB-F-… for aggregated case-study findings, RLB-H-… for raw per-model hallucinations) — like a DOI, the ID always resolves to the canonical finding even if URLs change.
RegLeg Specialist Panel (2026). "Finding#2, PFMI Principle 2 KC 6, non-executive risk-committee chair mandate fabricated — Practitioners — Company Secretaries." Citation ID: RLB-F-INT-BIS-CPMI-IOSCO-PFMI-2012-Q022. RegLegBrief AI Hallucination Research, published 2026-06-11. https://reglegbrief.com/regulators/j1/int/bis-cpmi/cpmi-iosco-pfmi-2012/practitioners/company-secretaries/finding/INT-BIS-CPMI-INT-001-CPMI-IOSCO-PFMI-2012-v1-022/
RegLeg Specialist Panel. (2026). Finding#2, PFMI Principle 2 KC 6, non-executive risk-committee chair mandate fabricated [Hallucination finding RLB-F-INT-BIS-CPMI-IOSCO-PFMI-2012-Q022]. RegLegBrief AI Hallucination Research. https://reglegbrief.com/regulators/j1/int/bis-cpmi/cpmi-iosco-pfmi-2012/practitioners/company-secretaries/finding/INT-BIS-CPMI-INT-001-CPMI-IOSCO-PFMI-2012-v1-022/
RegLeg Specialist Panel, Finding#2, PFMI Principle 2 KC 6, non-executive risk-committee chair mandate fabricated [RLB-F-INT-BIS-CPMI-IOSCO-PFMI-2012-Q022], RegLegBrief AI Hallucination Research (June 11, 2026), https://reglegbrief.com/regulators/j1/int/bis-cpmi/cpmi-iosco-pfmi-2012/practitioners/company-secretaries/finding/INT-BIS-CPMI-INT-001-CPMI-IOSCO-PFMI-2012-v1-022/.
@misc{reglegbrief_RLB_F_INT_BIS_CPMI_IOSCO_PFMI_2012_Q022,
author = {RegLeg Specialist Panel},
title = {Finding#2, PFMI Principle 2 KC 6, non-executive risk-committee chair mandate fabricated},
year = {2026},
publisher = {RegLegBrief AI Hallucination Research},
note = {Hallucination finding Citation ID: RLB-F-INT-BIS-CPMI-IOSCO-PFMI-2012-Q022},
url = {https://reglegbrief.com/regulators/j1/int/bis-cpmi/cpmi-iosco-pfmi-2012/practitioners/company-secretaries/finding/INT-BIS-CPMI-INT-001-CPMI-IOSCO-PFMI-2012-v1-022/}
}
Every finding on this page compares an AI subject's account of the rule against the regulator's verbatim text from the regulator's own portal. Both are linked. Each delta, its root causes, and impact analysis are documented and published with immutable Citation IDs.