Contributor: Max Dufour
The SEC went through a re-organization of its Enforcement Division, which had not happened for more than 30 years. The Division of Enforcement has realigned its 1,100 employees within five National Specialized Units and is expected to scrutinize asset managers and investment advisers. To fulfill its mission, the SEC will rely on enhanced investigative approaches and technology. It will also rely on its new Office of Market Intelligence to investigate tips and complaints.
What does it mean for financial institutions? The frequency and the level of detail of requests will increase. Real-time reporting will be expected to replace ad-hoc analysis relying on historical data and manual processes. A new wave of reinforced internal controls will remind many of Sarbanes Oxley. It will lead to inquiries on asset valuation and verification but also on the processes behind them.
What will be the near-term impact? In order to handle the additional regulatory pressure, financial institutions will need bullet-proof processes relying on state-of-the-art technology. It will allow them to respond promptly to inquiries and to communicate effectively with the market and with their investors.
What will need to change on the technology side? Infrastructures will need to be partially re-architected and aligned with the new reporting requirements. One key change pertains to the ability to load data in real-time or near real-time. It will require enabling mini-ETL batches processing or continuous streams, followed by surge-testing to ensure scalability. It will also impact Service Level Agreements (SLAs), which will need to reflect the new aggressive timeframes.
To accommodate real-time data loading and the ensuing drill downs, timestamps will need to be updated to a higher level of precision and homogenized across systems. It will ensure that data from multiple sources can be optimally transformed and exploited in an aggregated operational store. It will also support the enhanced analytical process, which will be relying on a constant flow of real-time data, raising expectations to the next level in terms of pattern identification and early warning signs discovery within each new dataset.
Who will benefit from this new landscape? Managing operational risk efficiently will be tied to the ability to successfully report real-time information internally and externally on short notice. Financial institutions with strong and updated technology infrastructures, from data management to reporting, will have sizeable opportunities to build competitive advantages tied to their superior reputation.