Regulation Best Interest (Reg BI) became a hot topic across the investment landscape when the SEC adopted new rulemaking guidance in June 2019. Digital broker-dealers and robo-advisers had many questions about how Reg BI and other rules apply to self-service or automation-driven investment platforms. Those questions are still widespread.
On January 6, 2021, it was announced that Ascension Data and Analytics, LLC ("Ascension") settled a lawsuit with the Federal Trade Clinician ("FTC") which claimed that they breached the Gramm-Leach-Bliley Act ("GLBA") Safeguard Rules by failing to properly assure that the security provisions of their third-party service provider to ensure if properly protected consumers identifying financial information. This case serves as a warning to all companies using third party vendors.
Regulatory scrutiny considerations for fintechs are likely to increase in 2021 and beyond. Disruptive innovators in blockchain and digital assets can help stay on the right side of current and future trends if they do not skip steps as they plan for growth. Mapping out the grey areas in advance and building a sustainable regulatory strategy will help keep newer disruptors in the black and out of the headlines.
FINRA Rules 3110 (a) and (b) require that any brokerage firm that operates under Financial Industry Regulatory Authority have protocols to supervise all employees, from the executives to the newest employee. The brokerage must also comply with SEC Rule 17a-4(f) to properly store electronic records.
InnReg compliance experts highlighted these seven takeaways.
Check if your brokerage meets all the requirements?
Fintech compliance regulations may seem like an unnecessary leftover from a pre-fintech world to some people. Especially in an innovative area such as fintech, many entrepreneurs consider dedicating resources to remaining compliant as a necessary evil at best. They see fintech as an opportunity to break free of the old world of slow-moving institutions and cumbersome regulations. But that perception is actually flawed. When planned and implemented properly, a robust regulatory compliance program helps fintechs find new sources of growth and revenue, ultimately resulting in a competitive advantage.
