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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The end game draws closer for new insurance capital regimes

Posted by Andrew Mais, senior manager, Deloitte Services LP, on June 28, 2016

Who is Leon Lett? He is the football player who almost got the record for the longest fumble return in Super Bowl history – 64 yards. But Lett started celebrating just before reaching the end zone, Don Beebe knocked the ball out of his hand and the play ended as a fumble, not a touchdown.

After an unexpected and spectacular play, there may be an all too human tendency to start celebrating before crossing the goal line. Some US insurers have watched with concern over the years as it seemed international supervisors were about to impose non-US influenced supervisory regimes on their operations. Now they may feel like the beneficiary of a Hail Mary pass after the Federal Reserve’s (Fed) recent issuance of its Advance Notice of Proposed Rulemaking on capital standards for insurance systemically important financial institutions (SIFIs) and for the other insurers it supervises, those with savings and loan holding companies (SLHCs).

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Across industries, 2016 shapes up as a year of regulatory transformation

Posted by Christopher Spoth, Executive Director, Deloitte Center for Regulatory Strategies, on February 19, 2016

Each year, the Deloitte Center for Regulatory Strategies publishes a series of outlooks on what the coming year may bring. Each one focuses on regulatory challenges that are unique to a particular industry. But perhaps the greatest lessons I find in them are the challenges that aren’t unique—the priorities that will likely shape the next 12 months for business leaders everywhere.

What do I see in 2016? A year of transformation. New tools are changing the ways regulators define their jobs. Organizations that recognize the changes have an opportunity to apply several lessons to their regulatory strategies:

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Compliance executives say globalization amplifies regulatory challenges–and agree local knowledge and communication are keys to overcoming them

Low-angle view of hospital sign

Globalization has opened more business opportunities around the world, but the pace and rigor of regulatory oversight and enforcement are rising as well, and regulators are cooperating more across international lines. For a company that operates in more than one jurisdiction, the risk of unintentional and even irreconcilable conflict is a natural consequence, and the resulting environment can affect the way people go about their business. To cope, companies should find ways to adapt global goals to local specifics.

That was a key takeaway from a great exchange of views I was privileged to moderate at the recent Cross-Industry Compliance Leadership Summit at Deloitte University. Compliance chiefs from financial services, life sciences, health care, consumer products, entertainment, communication, natural resource extraction, retail, and other industries gathered to compare their experiences and insights. In our own spheres, global regulation is a topic we address every day. But sharing views among different industries was a refreshing opportunity.

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TLAC | Final standards are only the start of a longer journey

Final standards are only the start of a longer journeyOriginally posted by David Strachan, partner & co-head, Deloitte UK, EMEA Centre for Regulatory Strategy and John Andrews, manager, Deloitte UK, EMEA Centre for Regulatory Strategy on the Financial Services UK blog on November 10, 2015.

Global systemically important banks (G-SIBs) will be required to meet a new prudential requirement – Total Loss-Absorbing Capacity (TLAC) – by 2019, in line with a new global standard published by the Financial Stability Board (FSB).

TLAC is the focal point for resolution authorities in their drive to make the ‘bail-in’ of creditors a credible means of absorbing losses and recapitalising failing banks, thereby eliminating the need for public funds. TLAC will essentially require G-SIBs to hold a layer of long-term unsecured debt over and above their minimum regulatory capital requirements – debt which will be made unambiguously loss-absorbing through bail-in.

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Federal Reserve proposes rule to require largest banks to hold minimum amounts of unsecured long-term debt

Federal Reserve proposes rule to require largest banks to hold minimum amounts of unsecured long-term debt
Posted by David Wright on November 5, 2015.

On October 30, 2015, the Board of Governors of the Federal Reserve System (Federal Reserve) unanimously approved an important proposed rule that seeks to improve the likelihood that the largest banking organizations can fail without the use of taxpayer funds or destabilizing the financial system. The proposal would establish new Total Loss-Absorbing Capacity (TLAC) and related Long-Term Debt (LTD) requirements for US banking organizations deemed to be “global systemically important banks” (GSIBs) as well as US Intermediate Holding Companies (IHCs) of foreign GSIBs. In her prepared remarks for the Federal Reserve’s open meeting on the proposal, Chair Janet Yellen argued that the new rules, in conjunction with other regulatory efforts to improve the resolvability of GSIBs, would “substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these firms.”

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New budget agreement includes health care policy changes, but generally shifts attention to regulatory activity through 2016 elections

Posted by Anne Phelps, on November 2, 2015.

President Obama on Monday, November 2, 2015 signed into law a two-year budget deal that sets federal spending levels through September 2017 and suspends the federal debt limit until March 2017. The House and Senate passed the bill last week. The legislation generally clears the decks of any must-pass legislation until after the 2016 elections, shifting the life sciences and health care sectors’ focus in Washington largely to regulatory activity on issues such as the 340B drug discount program, the new Medicare payment law (MACRA), and the so-called Cadillac tax on high-cost employer-sponsored health coverage.

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CMS takes next steps in implementation of new Medicare payment law: critical new details emerging for health care professionals, hospitals and health plans

CMS takes next steps in implementation of new Medicare payment law
Posted by Anne Phelps, on October 21, 2015.

The Centers for Medicare and Medicaid Services (CMS) is beginning the process of seeking comment and developing regulatory guidance on the recently passed Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA fundamentally changes how Medicare provider payments will be set in the future. It is critically important for health systems and health plans that employ physicians to begin to assess now how the law might affect their revenue and strategic priorities. Health systems and health plans may want to revisit their strategic relationship with health care providers in light of the law’s financial incentives for health care professionals to participate in risk-bearing coordinated care models.

Stakeholders should keep abreast of the critical regulations that the Administration is releasing over the next six to 12 months in order to be prepared to adapt to new requirements and processes that will start to be rolled out as soon as July 2016.

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New global banking regulations require a fresh look at booking models

CCAR attestation change would be about more than just forms
Posted by David Wright and Irena Gecas-McCarthy, on October 12, 2015.

Booking models in banking have traditionally been driven by a diverse set of factors–such as business priorities, legal and regulatory requirements, tax, and financial performance. When those models change, it usually happens incrementally over time in response to specific opportunities and business needs. It also usually happens without a holistic analysis that accounts for an integrated or big-picture view. But now, the regulatory environment and business strategy questions are driving rapid change.

Regulatory reform–both at home and abroad-is creating new and complex rules that are having a major impact on the way products are booked. As banking organizations comply with new regulatory requirements and supervisory expectations, they are overhauling business models and transforming how they operate. The need for transparency around booking models lies at the center of this change, since booking models determine how and where banking organizations transact. They also determine how the resulting risks are managed, both individually within a specific jurisdiction and together across multiple jurisdictions. Booking models are increasingly under scrutiny, and regulation and supervision are now key drivers of cross-border practices.

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Proposed rulemaking would extend AML requirements to Registered Investment Advisers

Proposed rulemaking would extend AML requirements to Registered Investment Advisers
Posted by Bob Axelrod

On August 25, 2015, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, published a notice of proposed rulemaking that would extend anti-money laundering (AML) requirements to investment advisers registered with the U.S. Securities and Exchange Commission (SEC).  According to FinCEN, “investment advisers have an important role to play in safeguarding the financial system against fraud, money laundering, terrorist financing, and other financial crime.” As such, FinCEN believes registered investment advisers (RIAs) should be subject to certain AML requirements because money launderers and terrorist financers may be exploiting them to access the U.S. financial system. The underlying concern is that broker-dealers and banks might not presently have enough information to assess suspicious activity or money laundering risk for transactions ordered by an adviser on behalf of an unidentified client.

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