Problem Statement

The regulatory landscape in the United States has evolved significantly over the last few years. Like every other industry, financial institutions must keep up with a staggering number of rules and regulations imposed by regulatory bodies like the SEC and FINRA. Federal banking regulators have signaled that supervisory scrutiny of financial institutions is expected to increase materially in 2024, with heightened attention on untimely remediation of supervisory findings (2024 Banking Regulatory Outlook | Deloitte US)

New laws and regulations are being proposed and imposed by regulatory bodies at the Federal, State or local level on a daily basis. With the increasing complexity of regulations and stricter punishments being imposed, it has become a daunting task for financial institutions to keep up with such a rapid pace of regulatory changes.

Here are a few ways to stay up to date with the regulatory landscape:

1. Proactive Regulatory Monitoring: Dedicate resources to continuously tracking regulatory developments, proposed rules, and enforcement priorities across all relevant agencies.
   Establish processes to quickly assess the impact of new regulations on the firm's operations, technology, and business model.
   This approach, however, is costly, time-consuming and are prone to human errors that may result in huge financial losses
2. Enhancing Governance and Risk Management: Strengthen the firm's compliance and risk management frameworks to identify, assess, and mitigate regulatory risks.
   Ensure robust oversight from the board and senior management to drive a culture of compliance. This requires extra effort and time from the company’s senior management team.
3. Investing in Compliance Infrastructure: Allocate sufficient budget and personnel to build out the compliance function with the necessary expertise and resources.
   Leverage regulatory technology (RegTech) solutions to automate compliance processes and enhance monitoring capabilities.
4. Navigating the Regulatory Perimeter: Monitor the expanding scope of regulation, particularly the CFPB's efforts to subject large fintech firms to bank-like supervision.
   Proactively engage with regulators to understand expectations and stay ahead of potential changes to the regulatory landscape.
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Recent Cyber Regulations Adopted by the SEC

1. Mandatory Incident Disclosure (Proposed Regulation | SEC.gov) | (Adopted Regulation | SEC.gov)
   Companies must report material cybersecurity incidents on Form 8-K within four business days of determining the incident's materiality, ensuring timely notification to investors. Disclosure requirements include the nature, scope, and timing of the incident and its impact on the company's financial condition
2. Annual Reporting Enhancements (Adopted Regulation | SEC.gov) | (Compliance Guide | SEC.gov)
   New additions to Form 10-K require detailed annual disclosures on cybersecurity risk management, strategy, and governance. This includes describing processes for assessing and managing cybersecurity threats and detailing the board of directors' oversight of cybersecurity risks.
3. Structured Data Requirements (SEC’s new cyber disclosure rule: PwC) | (Compliance Guide | SEC.gov)
   Disclosures must be tagged using Inline XBRL, promoting consistency and ease of analysis for investors.
4. Extended Compliance Dates for Smaller Companies (Compliance Guide | SEC.gov)
   Smaller reporting companies have an additional 180 days to comply with incident reporting requirements, with structured data requirements being phased in over a year.
5. National Security Exceptions (Compliance Guide | SEC.gov)
   Disclosure can be delayed if the U.S. Attorney General determines that immediate reporting poses a substantial risk to national security or public safety.

Conclusion

The compliance scenario for financial institutions in 2024 and upcoming years will be defined by heightened scrutiny, significant new rules and an increased focus on consumer protection. To keep up with the dynamic regulatory environment, businesses must take a proactive and strategic approach to compliance.

However, most businesses still rely on paper-based compliance processes and their proactive approach to compliance involves increased cost, dedicating extra resources and time to maintain these approaches. Although such solutions can prove to be very useful against strict penalties imposed for breaching regulations, they are very far from being efficient. Additionally, these approaches are still prone to inevitable human error.

But like most problems around the world, there is a solution that has proven to be the most consistent and effective in not just keeping pace with the increasing number of regulations, but also staying ahead of the curve.

Avery: An AI-powered automated compliance management platform

RegVerse, a Surge Ventures portfolio company built out a regulatory compliance management platform that completely transformed compliance processes for financial institutions. Avery eliminates paper-based systems and introduces automation and intelligence to stay ahead of the highly complex and rapidly changing regulatory landscape. By infusing Artificial Intelligence into the platform, Avery continuously monitors for new and updated regulations from the agencies.

Avery follows an AI-generated, human-guided approach that eliminates manually scavenging through documents and the internet just to get information, while its in-house compliance experts ensure complete precision and accuracy.

Through a quick onboarding process, Avery tailors itself to bring specific information that your business needs to your fingertips. Within seconds, Avery filters out all the regulations that apply to your business and generates a strategic action plan for each regulation. Avery also features the latest news, fines and regulations put out by regulatory agencies as well as a document management system ensuring that it acts as a unified platform for all your compliance needs.

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RegVerse offers solutions to meet all your compliance needs. To learn more about how RegVerse can help, visit RegVerse or contact us at info@regverse.com.