In September 2013, JPM announced a plan to spend $4 billion and hire 5,000 specifically in compliance. A reported 40% of financial services firms IT budgets are spent to help achieve regulatory compliance in 2014. Regulatory compliance could consist of Dodd-Frank, SOX, Basel, FINRA, and SEC. Violation of such regulation has obvious consequences ranging from fines to imprisonment. Such risks increase in decentralized and fragmented firms. Firms are exposed to greater regulatory risk if they engage in multiple business lines. Especially if interaction between various lines could cause conflicts of interest. For example, what if a firm's investment banker talks to the firm's equity research analyst about a company that the analyst covers that happens to be a client of the investment banker who is conveniently is doing a secondary offering for the company and needs a favorable report? Maybe a trader goes rogue and takes a position that exposes the whole book? Perhaps someone in Back Office document review sends a trade confirm of a client to a competitor? A broker at the wealth management arm sends an email to a client guaranteeing the return of investment on an instrument the broker is selling? Firms are seeking to limit such risks.
Information Technology firms response is to capitalize on this market. A compliance officer can only monitor so much until he or she is over-utilized and backlogged. Groups like Global-Relay can capture emails and Control Solutions can provide audits. The technology allows automation and monitoring of administrative tasks which can then be used as proof that a firm is compliant. Such innovations have become successful from a sales standpoint. Other than 3rd party providers, firm's are utilizing the cloud to capture and share information. If I were to speculate, any information technology provider that could preempt regulatory events for firms through monitoring electronic activity could prove a powerful market entrant.
- Nile C.
4/4/14 4:19pmEST
Information Technology firms response is to capitalize on this market. A compliance officer can only monitor so much until he or she is over-utilized and backlogged. Groups like Global-Relay can capture emails and Control Solutions can provide audits. The technology allows automation and monitoring of administrative tasks which can then be used as proof that a firm is compliant. Such innovations have become successful from a sales standpoint. Other than 3rd party providers, firm's are utilizing the cloud to capture and share information. If I were to speculate, any information technology provider that could preempt regulatory events for firms through monitoring electronic activity could prove a powerful market entrant.
- Nile C.
4/4/14 4:19pmEST
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