• by Ray Schultz , Columnist, March 11, 2022

Email marketers are well familiar with RegTech -- technology that helps brands comply with regulations. They have a full buffet of tools for dealing with GDPR, CCPA and other laws — programs that allow for consumer access to data and the ability to delete it and halt its sale for advertising purposes.  

And the businesses they are part of may have solutions for dealing with rules in other areas. Case in point: the financial brokerage sector. 

In 2014, brokers in this field were hit with new rules for managing customer assets following a decade of large Ponzi schemes and bankruptcies, according to 
“RegTech,” new research co-authored by MIT Sloan accounting professor Andrew Sutherland, as covered in an article by Betsy Vereckey on the MIT Management site. 

Broker-dealers subject to the Securities Exchange Act Rule 17a-5 and the 2014 amendments have increased the number of CRM and business intelligence software programs they use by over 13%. 

In addition, they are using 11% more distinct technologies on their websites. 

In general, such businesses have increased their IT budgets by 60% and the number of enterprise resource planning and data management software tools by over 10%.  

The authors created a dataset of software and hardware investments, IT budgets and labor demand, and website technologies. And they examined software tools: Oracle ERP, Salesforce, and HubSpot, along with website technologies like ThreatMetrix (for fraud detection), Pardot (for sales engagement), and goMoxie (for live chat).

The result? Those firms have experienced “a decline in customer complaints filed with the regulator (FINRA), particularly those most easily detected by technological monitoring. The likelihood of a complaint declined by 2.3%, the number of complaints fell by 3.5%, and customer-alleged damages dropped by 29%.”

The authors conclude that “data and information systems can create synergies throughout an organization, leading to improved customer service,” Vereckey writes. 

“RegTech” is co-authored by Ben Charoenwong, assistant professor of finance at the National University of Singapore; Zachary Kowaleski, assistant professor of accounting at the University of Notre Dame; and Alan Kwan, assistant professor of finance at Hong Kong University.