Regulatory analytics: Keeping pace with the SEC

5 insights into compliance

As 2016 drew to a close, the US Securities and Exchange Commission (SEC) touted its “vastly increased use of data and data analytics to detect and investigate misconduct.”1 The increasing scope and sophistication of analytics employed by regulators compel financial services firms to examine how they can use analytics, both in retrospective “look-back” manner and proactively, to address growing scrutiny and enforcement. Below are five insights that can be helpful in formulating a regulatory analytics strategy.

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White House directs Department of Labor to review Fiduciary Rule

On Friday, February 3, 2017, the White House issued a memorandum to the Secretary of the Department of Labor ordering an updated economic and legal analysis.

Since the Department of Labor’s (DOL’s) “Conflict of Interest Rule” (the “Rule”) and related prohibited transaction exemptions were finalized in April 2016, many impacted organizations have expressed reservations about the timeline and the volume of complex work required in order to be compliant by April 10, 2017.

Due to concerns that the Rule “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of [the] Administration,”1 President Donald J. Trump issued a memorandum (the “Presidential Memorandum”) directing the DOL to examine the Rule to “determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

The memorandum does not directly delay or order a delay to the Rule’s applicability date, but it directs the DOL to prepare an “updated economic and legal analysis concerning the likely impact” of the Rule, which shall consider, among other things:

  • Whether the anticipated applicability of the Rule “has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice,”
  • Whether the anticipated applicability of the Rule “has resulted in dislocations or disruptions” within the retirement services industry that may adversely affect investors or retirees, and
  • Whether the Rule is “likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.”

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Exam priorities for securities firms in 2017

The Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) recently released their annual examination priorities for 2017.  Although the regulators independently develop their areas of focus, there are six overlapping priorities that securities firms may want to address in the near term.

The SEC’s priorities are organized around three thematic areas (two of which, the first and third, were included in 2015 and 2016):  (1) protecting retail investors; (2) focusing on risks specific to elderly and retiring investors; and (3) analyzing issues related to market-wide risks.

FINRA’s high-level focus will be on:  (1) high-risk and recidivist brokers; (2) sales practices; (3) financial risks, including liquidity risk and compliance with recently effective amendments to Rule 4210 (Margin Requirements); (4) operational risks, including cybersecurity; and (5) market integrity.

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What is the role of compliance in battling cyber risk?

Cross-Industry Compliance Leadership Summit eyes the intersection of two disciplines

“It’s called the cloud,” Deloitte & Touche LLP Principal Julie Bernard remarked. “It’s not called the vault. Keep that in mind.”

Bernard and Deloitte & Touche LLP Managing Director Susan Ameel moderated a session at Deloitte Advisory’s recent Cross-Industry Compliance Leadership Summit about the ways compliance and cyber security meet, and how the executives responsible for those areas might benefit by coordinating their efforts.

Many of the industries most subject to cyber attacks are also among the ones that have the most sophisticated regulatory and compliance obligations. Financial services, energy and utility companies, health care organizations, defense and aerospace – they all have to safeguard their own sensitive data, their customers’ information, or both.

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Regulatory, legislative efforts focused on ACA repeal move forward as Congressional Budget Office releases new health coverage projections

Hours after taking the oath of office on Friday, January 20, 2017, President Trump signed an executive order that opens the door for the secretaries of the departments of Health and Human Services (HHS), the Treasury, and Labor, as well as the leaders of other federal agencies, to take regulatory action to ease requirements under the Affordable Care Act (ACA) or waive or delay enactment of certain provisions.

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So be good, for goodness’ sake

Predictive technology can help employers find the roots of both personal and corporate noncompliance. Where are the ethical boundaries?

As data-gathering and analytics technologies amass more and more ability to squeeze information out of what may feel like thin air, employers face new questions about using these tools to predict and detect behavior. “Can” vs. “can’t” isn’t the only frontier. There’s also “can” vs. “should.” At least one participant in Deloitte’s Cross-Industry Compliance Leadership Summit described themselves as “slightly aghast” at the possibilities.

In addressing the summit, hosted by the Deloitte Center for Regulatory Strategy Americas, Deloitte & Touche LLP Advisory Principal John Lucker said that whatever the benefits of predictive technology, one thing organizations “shouldn’t” do is allow the perfect to be the enemy of the good.

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Ethics has a strong business case, but measurement is less certain

Cross-Industry Compliance Leadership Summit explores corporate behavior

Are a “culture of ethics” and a “culture of compliance” the same thing? How does an organization build an ethical culture, and how can it measure the results?

At the recent Cross-Industry Compliance Leadership Summit hosted by the Deloitte Center for Regulatory Strategy Americas, New York University Professor Jonathan Haidt suggested there is a method corporate leaders can use to tackle these questions – and he compared notes with compliance executives who tackle them in real life every day.

Haidt is a social psychologist and author of the New York Times bestseller “The Righteous Mind.” His view is not only that there is a business case for ethics beyond “ethics for ethics’ sake,” but that large organizations can design ethical systems by working from the individual level on up. And he says the practice of measuring ethical culture is evolving.

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CMS provides updates on Quality Payment Program and new episode payment models as MACRA pushes forward

In late December 2016, the Centers for Medicare and Medicaid Services (CMS) released additional guidance for implementing the significant law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) as a follow-up to the Final Rule released in October 2016.

While the fate of other legislation such as the Affordable Care Act is in question, the implementation of MACRA continues to move forward as planned with bipartisan support.  The released guidance includes a number of updates to support providers transitioning to the Quality Payment Program (QPP) established by MACRA, including the 2017 quality measure performance benchmarks to be used in the Merit-based Incentive Payment System (MIPS) and the patient relationship categories and codes used to measure cost under MIPS.

Additionally, CMS finalized three new episode payment models with tracks which may be considered advanced Alternative Payment Models (APMs) for purposes of the QPP, as well as released additional information on the ACO Track 1+ model, which will qualify as an advanced APM in 2018.

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President Obama signs 21st Century Cures Act, including provisions with significant implications for health plans and health care providers

President Obama on Tuesday, December 13, 2016, signed into law H.R. 34, the 21st Century Cures Act. Although the law focuses largely on the Food and Drug Administration, the National Institutes of Health, and issues of primary interest to life sciences companies, the new law includes provisions with significant implications for health care providers and health plans, especially those offering Medicare Advantage products. The provisions in some cases will affect compliance plans, Medicare payments, and strategic opportunities for organizations, making it imperative that provider and plan leaders take time to review how the 21st Century Cures Act might affect their organization.

Highlights of key provisions affecting health plans and health care providers are provided below.

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