Data and Technology Challenges When Meeting Fiduciary Rule 3.0 Obligations

The PTE 2020-02 deadline is coming up, and firms must ensure that they have the proper processes by January 31 2022, and documentation and disclosure in place by June 30, 2022.

To address the industry’s questions and concerns, and to share approaches firms are taking to meeting compliance, InvestorCOM recently hosted a roundtable event “Preparing for PTE 2020-02”.

An interesting insight gathered from the roundtable is that many firms struggle with significant data and technology challenges around meeting Fiduciary Rule 3.0 regulatory obligations.

Many financial services firms have complex organizational histories based on mergers and acquisitions. Technology implementation over the years can result in multiple operating systems and data residing in silos. Many firms will have multiple versions of rep masters, account masters, and product masters, and quite often these are reconciled manually, overnight, or not at all.

The world of pre-trade analysis and post-trade review are coming together. A firm needs to know the basis for a rollover recommendation and create a comparison to the investor’s alternatives before the client’s assets are rolled over. The transaction also needs to be run through the back-end surveillance system, to ensure that it was completed and approved, so that commission and fees can be paid correctly.

Firms also need to be able to trace the data lineage – the history of the data as it is used throughout the process, from beginning to end. With multiple disconnected systems and manual interventions, this can also be a significant challenge for firms.

Today, many firms are working on substantial data remediation projects, to enable existing data and databases to be brought into this compliance process, and to ensure the data quality is sufficiently high for automation. If a firm is in the early stages of its Fiduciary Rule 3.0 project, one of the most important areas to assess is the quality and connectedness of the data that will be the foundation of any automation program. It is essential to impress on the business that it’s not an option to take a minimum viable product approach to this compliance process – data quality and availability must be present from the start.


Read more insights captured from the roundtable event, “Preparing for PTE 2020-02”.