FINRA releases report on regulatory technology

Financial Industry Regulatory Authority (FINRA) has highlighted five key areas here industry participants have most prominently leveraged RegTech innovations. 

The report identifies RegTech developments within the securities industry and potential opportunities and implications these technologies may have for broker-dealers.

Following an in-depth review of the sector, FINRA has highlighted five areas where industry participants have most prominently leveraged innovations: surveillance and monitoring, customer identification and anti-money laundering compliance, regulatory intelligence, reporting and risk management and investor risk assessment.

The regulator’s paper also identifies key benefits and risks to consider when exploring and adopting RegTech tools. Potential benefits include better risk management and improved efficiency through automation.

It also outlines a number of possible regulatory and implementation issues for broker-dealers to consider as they explore RegTech services, including supervisory control systems, outsourcing structure and vendor management, customer data privacy, security risks and others.

“Regulatory technology is playing an ever-increasing role for broker dealers and regulators must ensure they are keeping pace with industry innovations,” said Haimera Workie, Senior Director, Office of Emerging Regulatory Issues. “FINRA’s report provides an initial contribution to our ongoing conversation with market participants about how RegTech tools can help enhance compliance efforts in order to keep markets fair and investors safe.”

The report is part of the Innovation Outreach Initiative, which was established in June 2017 to foster an ongoing dialogue with the securities industry and to better understand FinTech innovations. The Innovation Outreach Initiative enables FINRA to better track FinTech developments across the rapidly changing industry environment in order to support innovation in the industry while maintaining investor protection and market integrity.

Copyright © 2018 RegTech Analyst

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