Emergence of regtech forces new approach


By Daniel Paperny

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The nature and culture of financial markets were being transformed by the latest developments in regulatory technology (regtech), which was forcing regulators to adopt a new approach to regulatory change, according to ASIC.

In his address at the 2017 ASIC Annual Forum in Sydney yesterday, ASIC chairman Greg Medcraft noted the advent of regtech represented a significant opportunity for the financial services sector to better “detect, understand and respond” to misconduct as it allowed better training of staff in compliance management and could improve response times to conduct breaches.

However, Medcraft noted regtech was also changing the way ASIC monitored and regulated issues of non-compliance, particularly as surveillance was increasingly data-driven.

“Regulatory changes and technological developments are changing fundamentally the nature – and also the culture – of financial markets, services and institutions,” he said.

“While our vision remains the same, the way in which we are approaching regulation is transforming.

“Through increasing access to data and more sophisticated analytic tools, we can be more proactive and pre-emptive in understanding and addressing the risks we see.”

He said efficiency gains from regtech could result in businesses’ compliance staff having an expanded education focus that would be concentrated on understanding and shaping firm culture.

“Regtech can have implications for promoting a good culture in financial services firms as well,” he said.

“This means compliance staff can become coaches and educators, rather than policemen.”

He noted new entrants to the space, such as Kaplan Professional-owned start-up Red Marker, showed the path forward for the future of regtech offerings that “not only detect misconduct, but they also educate when they detect possible issues”.

One way ASIC was moving to help foster an environment that could encourage regtech innovation, he added, was the creation of “data labs” that would enable the regulator to test new technologies alongside regtech entrepreneurs.

“Community expectations have changed; so too have the expectations of the government and the regulator, and even the black letter law,” he said.

“Our challenge, as regulators, will be to create an environment that encourages fintech and regtech without compromising our core objectives, [including] promoting financial consumer and investor trust and confidence [and] mitigating systemic risks.”

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