What’s Next in Regulatory Compliance

When the pandemic hit, we certainly sensed there would be a strong impact on our social lives. But what was not immediately apparent was the extent that Wall Street and its regulated financial services employees would be affected. The work-from-home revolution had arrived, and now one year later its influence has become evident.

Unfortunately the remote work that ensued, particularly among traders, created an environment that became more susceptible to market abuse. Regulators around the world, like the Financial Industry Regulatory Authority (FINRA), the Hong Kong Monetary Authority (HKMA), and the Financial Conduct Authority (FCA), found that scenarios like insider dealing became easier because many regulated employees weren’t being physically monitored on a trade floor any longer or certainly as directly.

As FCA Director of Market Oversight, Julia Hoggett, explained, “Whilst the fundamentals of the market abuse offences are constant, the ways in which the risk may manifest are not. The manner of surveilling for them must, therefore, also change.”  In addition to the new surveillance challenges, the markets saw a dramatic increase in volume and volatility. As a result, most financial services organizations pursued new technologies that could help reveal what’s going on in their markets faster, and in some cases before it happens, so that market abuse can be brought to light more effectively or prevented all together.

In the March to May 2020 timeframe, from pre-dawn to late at night, we were immediately hit with urgent queries from all types of global financial services organizations addressing compliance-related issues. Primarily, they sought guidance as they reshaped and readied their remote or relocated trading floors and compliance operations for the work shifts that were already taking hold. With our around the clock operational approach, coupled with a responsive, savvy professional services team at the ready, our compliance management team supported our financial service organization customers as they managed this new offsite, remote world. There was not a corner of the financial services industry that wasn’t caught up in the shifting dynamics of a pandemic

When regulators granted safe harbors with certain compliance guidelines, we worked with firms to modernize their operations with cloud-based technologies, and created more automated and agile processes. Where it was already in place, holistic conduct surveillance was further strengthened and became a hallmark of those firms which succeeded in meeting their compliance requirements. Those with vendor partners like us which offered  24-7 “follow the sun” services support, found it easier to work through the new requirements.

Today’s Changes – Real-time Surveillance 

At the close of our fiscal year, we noted with surety that the year-end reflected a strong trend to the adoption of surveillance improvements and new capabilities at leading financial institutions, especially with respect to conduct risk. Cloud adoption was no longer a potential option, but a primary strategy.  And this is also where real-time (intraday) surveillance gained interest.

What do we expect to see going forward? Many banks and brokers that we are working with today are wanting to change surveillance from a routine end-of-day (or next-day) activity to more of a real-time proactive approach — this shouldn’t be surprising. Firms already monitor other activities as they’re happening, including things such as liquidity and P&L.

 

Source: Traders Magazine

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