As the landscape of communication continues to evolve in our increasingly digital world, the financial services industry is feeling the pinch of regulatory scrutiny. In recent years, financial firms have faced nearly $2 billion in penalties from the SEC and CFTC due to unregulated “off-channel” messaging. This surge in “off-channel” communication, including usage of platforms such as WhatsApp, WeChat, SMS, LINE, and mobile calls, is largely fueled by the rise of hybrid work. Yet, regulators maintain that all business communications must be monitored, auditable, and occur only within official channels. In the words of SEC Chair Gary Gensler, “As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels. And they must maintain and preserve those communications.”
Navigating Distributed Compliance in Today’s Institutional Landscape
The last year has been a whirlwind for everyone. And while regulators such as the CFTC have offered temporary relief and extensions to certain voice trading and record-keeping rules in the increasingly virtual environment, distributed compliance parameters still remain a pivotal element of the institutional landscape. A distributed workforce is not a new concept in any industry, including capital markets. However, a lot of firms continue to struggle with how to address the challenges they’ve faced in the process, particularly in a shifting market ecosystem. While every company needs to employ remote working capabilities, there’s no question that it is difficult to manage and can create potential compliance challenges.
Shifting to the Cloud
With financial institutions acclimating to a longer-term remote strategy and some even beginning to employ permanent work-from-home policies, there has been not only an increased appetite for the cloud – but an increased need. The cloud has become particularly important in enhancing flexibility and redundancy. For the first time, firms are more open and comfortable allowing their data – including voice and communication data and disaster recovery solutions – to reside in the cloud. With users that traditionally work both on and off the trading floor distributed across numerous locations, the cloud has become the easiest place to store and retrieve data. While compliance vendors have typically offered on-premise solutions, cloud-based support is still in its nascent stages. This has opened the door for compliance providers to offer new and more sophisticated products. Conversely, customers need to be asking whether or not compliance vendors can provide both on-prem and cloud-based support.
Open and Interoperable
At Cloud9, one of our goals has been to establish a community of specialists that collectively addresses the integration, efficiency and mobility challenges that firms have faced in the virtualization of our industry. The key is ensuring that vendors are interoperable to enable efficient workflows and avoid performance issues for customers. The same goes for voice trading APIs, which are becoming increasingly more sophisticated to align with the need for greater flexibility in the institutional trading community. Each company will format their data within APIs a bit differently. As a result, if you’re a compliance vendor for instance, you need to be able to normalize data before it can be used.
Industry-wide Data Standard
This raises the question of whether or not an industry-wide standard for data is necessary. For now, it’s not imperative but as data sets become larger and more complex, this may be something that we see the industry transition to, especially as teams become more dispersed and compliance oversight becomes more challenging. To learn more about distributed compliance and how to navigate these challenges in our shifting landscape, please sign-up for Cloud9 and EY’s Distributed Compliance Virtual Roundtable on April 8. You can secure your spot by emailing [email protected]. For more information on Cloud9’s voice trading and cloud solutions, please contact us at [email protected]
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