Investment Operations

Financial Firms Struggled to Maintain Regulatory Compliance Standards

Financial Compliance

Greenwich Report Analyzes Challenges Facing Market Participants Trying to Maintain Compliance While Trading From Home

When COVID-19 shuttered trading floors in March 2020, many buy-side and sell-side firms faced a stark choice: shut down operations, or continue trading from home and risk violating the many security and monitoring requirements that govern capital markets participation.

Fortunately for firms that were under-prepared for the pandemic-induced upheaval, regulators in the U.S. and Europe granted preliminary relief to firms that might have broken compliance standards during the sudden shift to remote trading. However, market participants now are scrambling to ensure they have the infrastructure and controls in place to make remote trading as secure as trading from the office—and they are doing so while simultaneously managing an historic spike in trading volumes and the unprecedented transition of entire staffs to work from home environments.

A new report from Greenwich Associates, Regtech: Ensuring Communications Compliance in Exigent Circumstances, examines the challenges facing compliance departments during the COVID-19 crisis as they work to maintain business continuity while also ensuring regulatory compliance. It pinpoints 11 emerging risks facing firms during this transition, including data collection, monitoring infrastructure, network and functionality access, cybersecurity controls, and device provisions.

The sudden transition to WFH environments ushered in a spike in messaging volumes, an unprecedented increase in the use of voice and video conferencing platforms, and an overall dramatic shift in collaboration patterns. Those changes required a rapid integration of new communication channels into the monitoring ecosystem, as well as systemic tests of voice communication monitoring and other monitoring capabilities.

New Greenwich Associates data suggests that as firms addressed these issues, more than two-thirds of market participants experienced avoidable infrastructure-related challenge

“In particular, these issues were compounded for firms that were structurally unprepared to facilitate systemwide, secure remote access to internal applications and communication platforms,” says Danielle Tierney, Senior Advisor for Greenwich Associates Market Structure and Technology and author of the new report. “For firms that had minimal disruptions, the key was prevention and preparation.”