New Tech on the Block: Putting the Regulatory in RegTech

Shaping Global Markets Podcast Episode 3, Part 1

The 2008 financial crisis was an economic downturn felt across the globe with millions losing their jobs, homes, and savings. In its wake, regulators introduced legislation to make the financial system more secure, requiring the reporting of more data and information and defining new taxonomies.

What is RegTech?

As the demands of regulators increased, RegTech was born. Regulatory Technology, or RegTech, was developed to facilitate the confident, cost-conscious and accurate reporting and filing of critical business and investor data. More than a decade later, RegTech continues to help with critical taxonomy tagging like iXBRL, increasing back-office accuracies and efficiencies, and sharing important data and information with the public, RegTech has untapped potential that can further accelerate digital transformation across the financial and regulatory sectors and its all just beginning to unfold.

"The exciting part [of RegTech], for me, is how we can really help the investor, using the technology to deliver that information."
- Eric Johnson, president, Global Investment Companies

In Episode 3 of Shaping Global Markets, we break down the RegTech conversation into two parts. In part one, we discuss the regulatory side of RegTech with Eric Johnson, president of Global Investment Companies at DFIN. In part two, we focus more on the technology side of things with, Floyd Strimling, Chief Product Officer at DFIN.

Listen in to part 1 below.


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TRANSCRIPT

[Nataly Arber] Welcome to another episode of Shaping Global Markets, a series focused on key topics in the regulatory and financial technology space. I’m Nataly Arber, your host. And every episode, I'm joined by industry experts to discuss relevant ideas and answer timely questions about where the industry is headed. As always, we would love to hear from you about topics you want us to cover. So please, subscribe, leave a comment, or follow us on Twitter @DFINsolutions.

Today, I’m thrilled to be discussing RegTech’s impact on the financial sector. Following the financial crisis in 2008 and the “flash crash” of 2010, regulatory bodies questioned whether their approach was appropriately matched to the modern market and ultimately responded by putting new, extremely stringent regulations in place; companies quickly needed to reprioritize risk management and compliance, as cost for non-compliance was increasing. In this aftermath RegTech was born: a new technology that at its core is designed to support the accurate and efficient reporting and filing of financial documents.

I’m excited to be speaking with Eric Johnson, president of Global Investment Companies at DFIN, today, focusing more on the Regulatory side of RegTech.

Interview

[Nataly] Hi Eric, thanks for joining me and welcome to the Shaping Global Markets podcast.

[Eric Johnson] Yea, thanks Nataly! Glad to be here today.

[Nataly] We’re happy to have you as our expert guest today. We’re excited to dive into RegTech as our topic today, but before we do that can you tell us, and our listeners a little bit about yourself, about your experience in the regulatory and compliance space.

[Eric] Yeah, sure. I’ve been in the financial and regulatory space for well over 20 years now. Starting my career in a big six firm, specifically focused on financial services and then since moving to the operational side of things, my focus has been primarily around back office automation and making the processes more efficient -- from a communications and technology perspective – but ultimately, my focus has been on a very strong understanding of the regulatory environment and how the technology and the regulatory worlds meet, and how we can best serve our clients.

[Nataly] That’s so interesting. And especially that optimization piece fits right into our conversation today. When RegTech was first born, it was ultimately designed to help optimize some of the processes that happened. So, can you define in your own terms what is RegTech? and where do you see its greatest impact in the regulatory and financial sectors?

[Eric] I think the way we define RegTech is: certainly, technology is a big part of the process and as we’re seeing now and living through a global pandemic technology is helping us accomplish our daily responsibilities and helping us all stay connected. You know, ultimately, where I think technology will help us in the RegTech world is making the back-office operations more efficient. And using technology to create better workflows, using technology to create better shared content across data requirements. That’s the fiber or the backbone of a RegTech, but where RegTech gets very interesting is the regulatory component. On a global basis, regulators are changing

  • How they want to see data
  • How they want to see that data better-connected
  • Formats
  • How they want to see information
  • How things are filed
  • How things are distributed

I think we’re at a really interesting point in the industry, where RegTech, the complexity, and the requirements of the Reg side are matching up quite nicely with the technology that's available in the market today, to make that process more efficient.

And that’s where RegTech gets very exciting; because for many years what we wanted to do from an industry perspective, potentially was more challenging, because the technology wasn't necessarily where it needed to be to meet the Innovation demands, so to speak, then on the regulatory front there were certainly some things that didn't allow a real robust technology type solution. I think we're at a point in the industry where we're seeing data-driven filing requirements and the ability to link through taxonomies to see underlying information. I think we’re at a really interesting point in the industry, where RegTech, the complexity, and the requirements of the Reg side are matching up quite nicely with the technology that's available in the market today, to make that process more efficient.

[Nataly] And certainly it seems that as the SEC continues to transform, and honestly the entire industry is going through digital transformation in its own way, I think that RegTech is definitely helping propel those changes and helping people become more comfortable with what a future state could look like. But I'm also curious, do you have any concerns as RegTech continues to grow and becomes more accepted and incorporated into different workflows? Do you think as it grows in its use cases is there anything that we should be concerned about?