The following post was contributed by guest author Gary S. Kaminsky, CEO of GSK Consulting LLC.


RegTech, which is all the rage currently in the regulatory/compliance industry, is really in the nascent stages of development. WhatRegTech began as a re-application of FinTech solutions has emerged as the leading stand alone “software with services” industry. The growth of RegTech is a direct result of the increased global regulatory initiatives impacting the asset management industry.  Its usage has taken on a greater importance as the scrutiny of regulators and other third-party constituents has also increased dramatically.

What will RegTech look like in the coming years as the industry matures?

Certainly the answer depends in part on the ever-changing regulatory landscape and specific initiatives focused on by global regulators.  To date, individual RegTech solutions have evolved in response to specific compliance related challenges – personal trading surveillance, regulatory reporting and risk management oversight to name a few.  Adding to those challenges, are the demands of institutional investors that asset managers evidence substantial efficacies in their internal infrastructure in order to mitigate lapses that can compromise their investments.

The only way to meet these demands is to employ a Regulatory Enterprise Risk Management (“Regulatory ERM”) approach to developing, implementing and maintaining a robust infrastructure.  Regulatory ERM is a prerequisite to meeting the overwhelming challenges foisted upon managers as a result of the post-financial crisis torrent of regulatory/compliance obligations.  A successful Regulatory ERM system will incorporate multiple disciplines of expertise including, legal/regulatory, operations, finance, risk management, fund management and technology.

Given the breadth of areas of an organization that are impacted and the complexity of creating synergies among these different areas, RegTech will become the key engine driving the larger system.  Managers are increasingly searching for solutions that are more holistic in efficacy – ones that are capable of “solving their problems”, i.e. addressing many of their internal challenges.  The successful RegTech solutions of the future will be the platforms, which are designed to address the core issues that lie beneath each firm’s infrastructure – big data management.

Most of the challenges that managers are struggling with relate to how they align their internal and external datasets. Managers need to efficiently normalize and share data, as well as transform it into requisite protocols for internal audit and third-party transparency.  RegTech is the only effective means for facilitating big data management in a regulatory intensive environment.  RegTech platforms must be holistic with a comprehensive Regulatory ERM perspective.  The asset management industry will gravitate towards “one-stop-shop” solutions – solutions that manage data from inception to output and provide assurance of consistency, correctness and facilitation of compliance.

The RegTech driving this may derive from one service provider, or more likely will be a compilation of multiple software solutions seamlessly contributing to the overall infrastructure. Creating one platform with the breadth and depth to address all issues is extraordinarily difficult, and attempted solutions often leave compliance teams wanting. Rather, best-in-class, specialized RegTech solutions will continue to be essential tools in the Regulatory ERM system. However, in order to be most effective, they must be designed with an open architecture allowing them to either become the platform around which a more holistic solution is built, or to fit seamlessly within such a holistic solution.  It also is important to note that technology only can get you so far in the context of regulatory/compliance exercises.  At some point, there is a need for human interface to ensure the appropriate policies and procedures are coded into to software and to review and analyze the outputs.

RegTech of the future must be easy to use and flexible enough to allow individual firm bespoke efficacy.  What will RegTech look like several years from now? RegTech will be the engines driving a multi-discipline, holistic Regulatory ERM platform enabling asset managers’ to more effectively run their businesses while complying with global regulatory mandates.