The financial industry hasn’t had a data breach as big as the one that hit Target recently, but it still needs to do more when it comes to protecting investors, a recent survey found.
More than 40% of financial professionals surveyed last week believe investors are “at greater risk given the pace of tech advancements and the challenges of remaining compliant with regulations,” according to Finect, a social-media platform for those in the industry.
In addition, nearly 60% say technology is changing “as fast as the markets or faster,” which puts great pressure on firms, regulators and advisors to keep up.
“It’s a New Tech World Order, and the businesses that thrive in the future will understand how to use technology that’s changing almost as quickly as markets themselves,” said Finect President Jennifer Openshaw, in a press release.
There are new kinds of problem as tech capabilities expand “exponentially,” Openshaw explains. “Systems are designed to move faster and manage larger amounts of data than in the past, from institutional trades to the smallest text messages. And everything must be preserved for compliance, as well.”
The Financial Industry Regulatory Authority fined Barclays Capital $3.75 million last month for its systemic failures to preserve electronic records and certain emails and instant messages in the manner required for at least 10 years. Six months earlier, FINRA fined LPL Financial (LPLA) $9 million for 35 separate “significant email system failures” related to arbitration proceedings and for making material misstatements to FINRA during its investigation.
The Finect survey finds that most professionals, 66%, work for or with firms that have adopted new technology to keep up with compliance rules developed over the past two years; 20% say their firm did not.
Furthermore, 71% say their firms do update their compliance policies when new technology advancements are made, such as mobile apps or social media, while 16% say their firms do not.
New Tech Thinking
For firms to avoid regulatory issues and better protect investors, these three suggestions could prove highly beneficial, according to Openshaw.
- Speed is the new normal. Thus, managers need to understand that technological change is growing at rates unseen before and expect new tech problems.
- Incorporate flexibility. Managers should design systems and platforms that are able to adapt quickly to change rather than using the same tech solutions they’ve used in the past.
- Listen to clients/investors. The growth and power of social media means that investors expect to be heard. Respond accordingly.