Welcome to the latest episode of At the Forefront: Fintech Conversations!
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In this episode, Head of Content Sam Belden sits down with Dave Emero, Head of Regulatory Reporting Product Strategy at n-Tier, a financial technology company that couples deep industry expertise with a unique software platform to help firms minimize the risks and costs associated with regulatory reporting. Sam and Dave unpack SEC Rule 13f-2, a new regulation designed to enhance transparency into firms that engage in the short-selling of equity securities, which will go into effect next year. They discuss the potential impact of Rule 13f-2, how affected firms can adapt to the shifting landscape and how n-Tier can assist with these efforts.
The conversation begins with Dave providing some background on the rule itself and complications that could arise during the implementation process, including some of those highlighted in a lawsuit initiated by three trade organizations representing the asset management community. Importantly, Dave explains that Rule 13f-2 will require firms to identify the aggregate weighted short positions they hold across all entities in common control, so it will affect both the buy side and sell side.
Next, Dave highlights the general lack of awareness of the rule’s specifics, such as its demand for security-by-security monitoring and expanded scope for who must engage in short position reporting. Key priorities for affected firms should include increasing proficiency in XML reporting, making settlement date position data more readily available and developing more efficient data aggregation methods.
Dave’s perspective is informed by his 18-year career in regulatory operations, which led him to join n-Tier last year. He explains how the sophisticated data analysis capabilities of n-Tier’s platform can deliver efficiency, flexibility and an easier path to compliance for firms of all sizes and business models. Sam and Dave dive into the potential benefits of working with a specialized provider like n-Tier over building complex reporting capabilities in house. Given the scale and complexity of regulations like Rule 13f-2, as well as the relative scarcity of internal resources, working with a third party is often the best approach.
They then highlight n-Tier’s work to educate and prepare the industry for Rule 13f-2 implementation. The firm is participating in a number of industry working groups, collaborating with organizations like the Financial Information Forum (FIF) to help explain the requirements and develop best practices for reporting. Dave explains that one primary goal of these efforts is to collaborate with the SEC to produce a list of the precise datapoints required to foster industry standards and promote consistency across filings and firms.
Lastly, Sam and Dave examine some potential future priorities in financial services regulation and compliance reporting. Dave points to multiple multimillion-dollar enforcement actions against firms, stressing the importance of completeness and accuracy in their surveillance functions. He also highlights that the accelerating pace of SEC regulation is magnifying the need for accurate, streamlined reporting processes.
If you’d like to learn more about n-Tier’s regulatory reporting technology, visit their website here.
See below for a breakdown of what was discussed. Happy listening!
Timestamps:
2:00 – What affected firms should understand about Rule 13f-2
6:50 – How firms should prepare from a technology and data standpoint
13:15 – How much firms will need to adapt their existing reporting processes
22:50– The benefits of outsourcing these capabilities versus building in house
26:07– n-Tier’s industry education efforts on Rule 13f-2
31:20 – Potential future developments in financial services regulation and compliance reporting
