SEC Commissioner Hester Peirce made an important speech at the RegTech 2023 Data Summit earlier in the week. Everyone who has a stake in financial transparency and regulation should read it, as it adds context to the Financial Data Transparency Act (FDTA), passed late last year.
Commissioner Peirce laid out four guiding principles for implementing FDTA, which modernizes the collection and dissemination of financial data by adopting structured data formats:
- Have a Strategic Implementation Vision. Regulators need to understand “where structured data requirements would be most helpful and ... implement the requirements accordingly.” They must be investor focused, committed to improving the utility and relevance of the data.
- Take Cost Concerns Seriously. Benefits must be balanced against costs. Smaller firms, especially, are sensitive to increases in expenditures. Nevertheless, the commissioner is hopeful that costs may not be a significant concern in most cases.
- Appropriately Constrain the Urge for More Data. As it becomes easier and cheaper to gather and analyze data, regulators must remember that “Collecting heaps of data without a clear regulatory need undermines regulatory legitimacy.”
- Keep Up With Changing Technologies. Regulators must be sensitive to the fact that embedding technological requirements in rules can be burdensome when those rules evolve.
DFIN long supported passage of the FDTA because it provides transparency and will drive the adoption of RegTech solutions that use AI and machine learning to help investors make informed, data-backed decisions. These goals are especially important to DFIN. Our ActiveDisclosure financial reporting software as well as our regulatory experts have helped public and private companies, and government agencies alike, transform how they access, understand, and utilize data to meet regulatory compliance, report to stakeholders, and improve business operations.
The law deserves to be implemented thoughtfully and with care, and Commissioner Peirce’s remarks at RegTech indicate that it will be. The principles she discusses are sensible and focused on delivering excellent results with minimum disruption.
Commissioner Peirce also made mention of advice she received from former Commissioner Luis Aguilar, who said: “When it comes to making decisions, an SEC Commissioner should be wary of simply accepting the status quo. The securities markets are in a state of almost constant evolution, which calls for a degree of open-mindedness and adaptability.”
An excellent example of adapting to a changing world, the FDTA launches a new era of innovation and modernization in financial services.