2018: The Time for Regulatory Data Platforms – New York Event

On 17 May 2018, RegTech Associates’ “In Partnership” series continued with BNY Mellon hosting an event in New York entitled “2018: The Time for Regulatory Data Platforms”.

This followed a linked event held at BNY Mellon London on 17 April – notes following that event can be found here and a corresponding whitepaper can be found here.

NYC Eventbrite no BNY Mellon logo

The event focused on exploring the data challenges facing buy-side financial institutions in meeting their regulatory obligations and how RegTech solutions can best be deployed to address these. Attendees and participants included large global banks and asset managers.

Themes explored included the following:

  • How regulations affect the offerings and business of buy-side firms
  • How RegTech solutions can add value and efficiency to a business
  • How regulatory data combined with Artificial Intelligence can drive forward-looking RegTech solutions
  • How the evolution of RegTech through collaborative practices is likely to transform both businesses and the activities of regulators

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Buy-Side Considerations

As it is throughout Europe, the buy-side is experiencing a wave of regulatory change in the US. Global regulations significantly impact buy-side clients, pushing them to consider innovative solutions for compliance, reporting and associated workflows.

Global firms are currently dealing with multiple changing regulations simultaneously. This is a new development for many buy-side firms, which now need to move away from looking at things on an individual basis to approaching them holistically. It is for example important to examine how attributes required for reporting under multiple frameworks overlap.

When banks set their strategies, they generally need to be asking three questions:

  1. How does regulation impact our entities in Europe or in the US?
  2. How does regulation impact our buy-side clients?
  3. How do we keep our products compliant with the needs of our buy-side clients?

The complexity of business models together with the volume of regulations poses a costly problem: the overall cost to the fund management industry comes close to $100bn. Most firms have come 10-25% of the way in absorbing this cost – the market therefore has further to go in terms of the necessary spend.

John Byrne, CEO of Corlytics, commented how the current “mood music” from regulators includes firm language regarding the buy-side. John sees great opportunities for RegTech within buy-side firms as these tend to have relatively few systems to replace and can therefore much more easily go straight to adopting state-of-the-art solutions.

Alex Acree, Co-Founder, Managing Director and General Counsel at Fenway Summer Ventures, also sees big opportunities for the buy-side, which has traditionally been more lightly regulated, to “leapfrog” legacy systems and technologies that have been used on the sell-side.



RegTech Solutions Can Add Value and Enhance Efficiency

Participants agreed that if RegTech can’t add value to businesses, it is unlikely to take off.

A key issue is the prevalence of legacy technology platforms and poor data warehousing practices. As buy-side firms entered new asset classes and expanded into new markets, they typically developed bespoke processes as opposed to thinking about global platforms, solutions and operating models. This resulted in the current “perfect storm” of multiple legacy platforms and legacy datasets, mostly deployed without unifying principles.

John Byrne outlined how firms can deploy RegTech to help them risk-adjust the relevancy of regulatory changes and correspondingly establish priorities.

Alex Acree highlighted how there is a “whole level of assessment” around figuring out what particular kinds of needs are worth solving. A key question is where firms want to deploy technology to effect change.



Regulatory Data Combined With Artificial Intelligence Can Drive Forward-looking RegTech Solutions

As regulators demand an increasing amount of data and data attributes be monitored and reported with increasing frequency, significant difficulties lie in the lack of centralisation and standardisation of regulatory data.

Mus Chagal, Entrepreneur-in-Residence at Ascent Technologies, described how Ascent applies machine learning and predictive analytics to help clients automate frustrating, expensive, error-prone compliance tasks.

To avoid the risk of missing valuable notifications, companies are hiring personnel to constantly monitor various regulator websites. Such approaches are not scalable. Combining data science and machine learning with practical experience reduces risk and makes compliance teams both more efficient and more effective.

John Byrne emphasised the need for standards to be defined and driven by the industry so that Artificial Intelligence can be used reliably and in a repeatable manner.

Greg Breeze, Principal, Information Governance Practice at Actiance+Smarsh, highlighted how “AI is now real”: it is commercially viable and practical for organisations to make use of it. Machine Learning can for example be used to track and monitor communications to find what isn’t a known issue.

Alex Acree commented how certain kinds of decisions taken by regulated institutions need to be explainable, for example in credit decisioning processes, whereas others do not – for example where AI is used to monitor communications.



Collaborative Practices and the Evolution of RegTech 

Mus Chagal pointed out that we know the RegTech industry is on the right path when law firms, banks and regulators are approaching RegTech firms saying “help us handle regulation better”, “help us do this job more efficiently”, and “help us solve problems”.

Buy-side firms commonly ask for help to understand what other firms are doing – one of most common questions from Asset Managers is “what are other firms thinking about and how are they interpreting a given regulatory requirement?”.

John Byrne expressed how one positive aspect of the RegTech space is that most firms talk to each other as they realise the need for extensive collaboration: regulatory compliance is something they must all do well. Firms also want to know how they stand relative to peers.

Greg Breeze described how major current technological trends are around open source, the cloud and big data. All of these are coming to the world of Financial Services in the form of RegTech, with large institutions banding together to explore how they can deploy RegTech solutions “in the real world”.

Regulatory compliance issues cannot be solved by simply adding up new technologies. An evolutionary process is needed, where it is important to find new technologies that enable the linking of multiple other technologies.

Alex Acree highlighted a broader industry-wide educational aspect: regulators in the US and the UK have begun listening to ideas about how technology can fundamentally change the way regulation is done. It is as important to lay the groundwork for new solutions as it is to figure out what those new solutions are.


We will be publishing a whitepaper based on this 17 May event. Sign up to join the largest independent RegTech community to be kept up-to-date with our activities and publications:

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