The US federal, state, and local regulatory agencies periodically propose and enforce new laws and regulations related to financial and wealth management industries. Financial institutions often find it increasingly difficult to keep up with the dynamic nature of regulatory changes due to the growing complexity of regulations and the harsher penalties being applied.
Global corporations and businesses that operate internationally are required to abide by the relevant laws and regulations in every nation they do business in. Certain industries, particularly financial services, information technology (IT), and healthcare - are subject to a plethora of intricate regulations and compliance frameworks, because of their corresponding effects on the financial business sector, dynamic digitization project implementation-based economy, and the health infrastructure.
Additionally, the increasingly complex, dynamic and growing cyberattack incidents now leaves many of these industries at serious risk of cyber breaches and operational downtimes.
The process of adhering to applicable laws, rules, policies and procedures, standards, andother guidelines is known as regulatory compliance. Take for example, the regulations and amendments proposed and published by the US governmental and regulatory organizations such as FINRA, SEC, and others.
Organizations can avoid expensive legal battles,penalties, and fines for not complying with regulations imposed by the regulatory agencies. [GU1] [SM2] Organizationscan reduce legal risk and safeguard their financial stability by complying with regulatory requirements. This is where the compliance management system comesinto play.
These disclosures aim to enhance transparency and accountability in cybersecurity practices.
INFO: The aim of these amendments is to tailor the organizational governance structure and risk management framework to appropriately reflect the heightened importance from a board oversight and fiduciary duties perspective. The proposed amendments are intended to better inform investors about a registrant's risk management, strategy, and governance and to provide timely notification to investors of material cybersecurity incidents.
As a business expands its portfolio, the scale and complexity of applicable regulations also increase due to overlapping jurisdictions of multiple authorities and agencies.
Ensuring compliance requires implementing appropriate procedures, policies, and measures. Comprehensive compliance systems are now considered essential, if not critical, to protect businesses from regulatory infractions.
A Compliance Management System integrates internal policies, industry standards, and regulatory requirements. It enables organizations to maintain continuous regulatory compliance and proactively avoid potential non-compliance issues.
INFO: Compliance Rule Violation: Failure to comply with these legal requirements can often bring heavy fines and legal troubles. For instance, In February 2023, the SEC fined a small advisory firm, PNC Investments LLC, $300,000 for failing to adopt and implement adequate compliance policies and procedures. The firm failed to conduct an annual review of its compliance program, leading to several regulatory lapses.
In 2024, there will be much more compliance adherence preparation required from the wealth management and financial services sector.
Implementing compliance solutions can streamline workloads and reduce risks by aggregating activities and data, which accelerates mitigation strategies. How organizations handle new regulations significantly influences regulators' assessment of Compliance departments, especially in sectors like Finance, Banking, Capital Markets, Payments, and Asset Management. Strengthening cybersecurity in these sectors builds trust with investors and consumers, enhancing market perception.
Ensuring compliance is increasingly critical as digital innovations, including artificial intelligence, become integral to various sectors. Businesses can leverage AI to automate complex tasks and analyze data effectively, improving compliance management. AI models like Large Language Models (LLM) can forecast compliance risks using current and historical data, enabling proactive measures to address potential issues before they escalate.
The regulatory landscape has recently become highly dynamic and unpredictable. Most WealthTech tools on the market will overwhelm you with excessive information. Avery stands out by filtering out the clutter from the internet, delivering only the most relevant and organized information tailored to your business. Additionally, Avery continuously monitors regulatory agencies for new regulations or updates to existing ones. If any changes impact your firm, you’ll receive immediate notifications with all the pertinent details, eliminating the need for manual tracking and ensuring you stay informed effortlessly.
Avery analyzes the regulation document for each regulation, and figures out what needs to be done in order to stay compliant with the regulation. Based on the document, Avery breaks it down into small action items and creates a project plan that will help the business stay compliant.
Every action item within an action plan is known as a regulation obligation, or task. You can select a task to view its corresponding details, the target date, the owner, the status of the task and view any attachments linked to the task.
For every task, you will be able to add a control test and upload its result. Control tests are essential to test your policies regularly to ensure that they are adaptive to changes and are effective in maintaining compliance. You can also view any recommended changes based on the test result for a control test.
Simply upload firm policies into a secure portal, Avery can then take those policies and conduct an AI-powered Gap Analysis, reviewing the firm’s specific policies against relevant regulations. The output generates an Action Plan for task management ease - and provides the necessary details to revise the policy to ensure it is up to par with regulations.
It is a chatbot built on a generative AI model and trained specifically on the regulatory environment. You can ask it any questions about regulatory news, rules and enforcement actions, etc. For a wealth management firm, the compliance related data is extremely sensitive and cannot be compromised. By using Avery’s AI chatbot, firms can ensure that their data is secure and stays within the Avery cloud.
Avery scans the internet and extracts enforcement actions that were taken by regulatory bodies such as the SEC, FINRA or other state agencies. The Fines module in Avery contains details about fines and penalties that have been imposed on firms for not complying with regulations and standards enforced by these regulatory agencies.
You can select an enforcement action to view the details of the action, the monetary amount that was fined, the date when the action was taken, the agency that took the action along with a URL to the agency’s enforcement action notice.
This information allows firms to get insights on the penalty imposed for not complying with specific regulations and keep a pro-active approach.
The Avery application lists out the specified regulations (SEC, NASAA, DFPI, etc.). To stay informed about the most recent rules, policies, or relevant activities, there is a dedicated ‘News’ module curated for you.
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.
Avery by RegVerse, 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. Are you ready to transform your compliance strategy and procedures? Contact us now!
Key Terms: Compliance Management, Financial institution
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