Running Toward the RegTech Revolution

I like to get to conferences early when I can. It lets me absorb the local environment, which often informs my perspective in new ways. Beautiful Scottsdale, Arizona, the site of the CSS Fall Compliance Conference recently held on September 23-25, was no exception.

Just stay with me for a bit (I promise to talk about regtech stuff soon). Upon arrival at the expansive venue, the Hyatt Regency Hotel & Spa at Gainey Ranch, I didn’t even need to leave its confines to get a first taste of Arizona. A back corner of the lobby level offered an exhibit on the history and culture of Hopi Indians, one of whom struck me in particular.

Lewis Tewanima, who liked to run long distances in the Hopi tradition (really long, as in 50 miles), grew up in Second Mesa on Arizona’s Hopi Reservation, and like many others was sent to boarding school in Pennsylvania (pursuant to a deeply controversial government “assimilation” policy, which you should Google if you aren’t familiar with it).There, he became a teammate of legend Jim Thorpe and student of legendary coach Pop Warner, proceeded to win numerous races and claim a silver medal in the 1912 Olympics – thus carving out his own legendary status – and returned home a hero, spending the rest of his life farming on the Reservation. So for me, as the days went by, and after seeing Taliesin West, hiking among the red rocks in Sedona, attempting (and failing at) line-dancing, and finally learning how to pronounce “Saguaro” cactus, the story of Lewis Tewanima stuck the most.

Strange as it may seem, he came to mind during one of the many interesting panel discussions at the conference: “RegTech Revolution,” featuring Andras Teleki, Chief Legal Officer at the mutual fund administrator M3Sixty Administration, and E.J. Yerzak, Director of Cyber IT Services for CSS. They looked at how technology has enriched our ability to meet regulatory compliance challenges.

Technology is by now seen as a necessity for firms (in critical aspects such as an internet service provider, website, e-mail communication, mobile access, and data backup), as well as going further as an enabler (providing word processing flexibility, file sharing and collaboration, client portals, live meetings and communication, and dynamic sales data). And yet – here’s where that irrepressible runner from Second Mesa comes in – Andras and E.J. described how a firm’s ability to successfully harness all that technology and data still depends on the talent and diligence of individuals.

Andras pointed out that an “inertia mindset” can prevent individuals at a firm from facing a challenge in the first place. Even when presented with the possibility of achieving excellence in the long run, people are often reluctant to try because they see it as difficult and burdensome.

Once overcoming the hurdle to address the problem, it is up to individuals to select the right solution. Some applications are more robust than others, as Andras described with the example of “retail” vs. “commercial” versions of software that may otherwise appear equivalent. Moreover, any solution’s apparent advantages may in fact disappear under the scrutiny of a rigorous cost-benefit analysis, which of course depends on assessments made at the individual level. Finally, E.J. cited any technology’s potential exposure to security concerns, which may not have existed under a firm’s manual processes, and which must be examined by the individuals best positioned to do so.

Once a firm has chosen and implemented its technology solution it will be the firm’s individuals, and not the solution itself, who maintain the solution’s continued effectiveness. This is why, as E.J. noted, “key man” risk is so important. (To address this, he said, every step in taking a successful automation should be documented, so that “key man” risk is minimized). Andras added that properly testing automation is important, and relies on the expertise of individuals. He used the example of a solution for a firm’s accounting department, which should be tested not just by the firm’s technology personnel but by the firm’s individual accountants who ultimately will depend on it the most. Andras also addressed the tremendous sets of data available to firms. These are vulnerable to problems with data accuracy, which of course means that a firm’s various complex processes relying on that data will suffer as well. He noted that this especially is the case when underlying client data is messy or inaccurate, a problem which often requires the expertise and close attention of individual specialists to resolve.

E.J. and Andras also broached other aspects of our “RegTech Revolution” currently under way, making the hour-long session a fairly wide-ranging discussion. But by the end of it, one clear lesson they had imparted to the firms in attendance might go as follows: Automate to the best of your capacity but do it the right way, and don’t underestimate the value of a Lewis Tewanima in your corner.


Interested in attending our next conference? Our spring 2020 event is set for the Ritz-Carlton, Sarasota in sunny Florida. Register now using the discount code CSS2020 for $600 savings!


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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

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