The SEC unanimously proposed new rules to require certain key market participants to have in place comprehensive policies and procedures surrounding their technology. The SEC’s proposal, which is called “Regulation SCI,” would replace the current voluntary compliance program with rules whose violation may be the subject of enforcement actions.
SROs, certain alternative trading systems, plan processors, and certain exempt clearing agencies would be required to design, develop, test, maintain, and survey their key systems. The proposed rules would require them to ensure that their core technology met certain standards, to conduct business continuity testing, and to provide certain notifications in the event of systems disruptions and other events.
Lofchie Comment: The new rule requirement will present real challenges for compliance professionals and particularly for a firm’s Chief Compliance Officer, who is responsible for the creation and enforcement of reasonable supervisory procedures. Determining that a firm has adequate procedures for implementing and maintaining various types of technology is not a routine compliance skill set. I wonder if the job of establishing appropriate compliance as to technology, at least at larger firms, requires a specialized skill set in the same way that serving as “FINOP” requires a specialized skill set. (See movie clip from YouTube.)
See: SEC Fact Sheet.