In the near future, regulators around the globe will have access to more information regarding financial transactions, hedge fund portfolios and, in some cases, algorithmic logic, than one would have ever believed possible just a few years ago. This is part of a broader trend of increasing enforcement activities among regulators and federal agencies. The ramifications only now being seriously weighed by compliance officers, technologists, policy makers, enforcement agencies and outside counsel.
How financial institutions are managing to cope with more stringent oversight – and prosper from compliance – is the topic of a panel I am moderating on June 19 at the London Hotel in New York. (The event is free and so are the drinks. But space is limited.)
One primary concern among financial institutions is that as more data is analyzed by regulators, the number of cases flagged as potential violations will increase substantially. Even based on the incremental amount of new information being delivered to regulators in the last year, market participants are reporting an increase in regulatory inquiries. The number of inquiries is expected to rise when reporting requirements skyrocket under Dodd-Frank.
Handling an increasing case load of inquiries would be challenging enough but financial firms will also need to reduce response times to one to two business days, deliver a copy of the underlying data used to generate the report and/or a machine-readable data file. Given that most financial institutions use multiple front-end and trade processing systems, the collection, validation and delivery of these responses is no small task.