What are Regulatory Compliances and how do they Impact You?

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.

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What are Regulatory Compliances and how do they Impact You?

The process of adhering to applicable laws, rules, policies and procedures, standards, and other 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 that may result from non-compliance with regulations.  Organizations can reduce legal risk and safeguard their financial stability by complying with regulatory requirements. This is where the compliance management system comes into play.

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Recent Updates by SEC on Cyber Regulation

1. Material Cybersecurity Incident Disclosure:
   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
   • The impact of the incident on the company's financial condition
2. Annual Reporting Enhancements:
   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
   • Detailing the board of directors' oversight of cybersecurity risks
3. Structured Data Requirements:
   Disclosures must be tagged using Inline XBRL( eXtensible Business Reporting Language), promoting consistency and ease of analysis for investors
4. Extended Compliance Dates for Smaller Companies:
   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:
   Disclosure can be delayed if the U.S. Attorney General determines that immediate reporting poses a substantial risk to national security or public safety.

These disclosures aim to enhance transparency and accountability in cybersecurity practices.
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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.

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What is a Compliance Management System and How is it Pivotal?

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.
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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.

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Compliance Business Impact & the Role of AI

‍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.

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What is Avery?

Avery by RegVerse combines human expertise with advanced AI for transparent, secure, and responsible regulatory management for Wealth management firms.

• Avery holds the capability to replace obsolete systems with automated and intelligent solutions, and to stay ahead in the rapidly shifting complex regulatory environment.
• Infused with artificial intelligence, Avery keeps an eye out for any updates or new rules from the regulatory agencies.
• All the rules and regulations that are relevant to a specific client are automatically provided by Avery, after the quick onboarding is completed.
• AI-driven regulation summaries facilitate the efficient navigation of regulations, action plan creation, and task management for clients using a single platform.
• Built-in news module allows firms to check out news and press releases straight from the regulatory agency’s websites. Users can read the news directly from the source, check out the articles that they have read previously as well as bookmark them.

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Avery Core Competencies

‍Streamlined Regulatory Framework:

Avery provides firms with a list of all the regulations that are relevant to your specific business.

Action Plans and Tasks:

Action plans can be made for any regulation. The fines imposed by each agency, along with all enforcement actions, are displayed in Avery. By choosing a particular regulation, you can include additional ‘Tasks’ in an ‘Action Plan’. You can select a regulation to view the corresponding regulation summary, enforcement date, and more. The Avery Task creation page is pre-filled with fields based on your specific query.

News:

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.

Gap Analysis:

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.

Avery Co-Pilot:

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.

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‍Contact RegVerse

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