Last year, the Securities & Exchange Commission issued Data Delivery Standards detailing its technical requirements for e-discovery. That directive and a subsequent clarification serves as a reminder that effective output management now will pay real dividends later when documents are required for auditing and compliance purposes.
The new standards were issued with little explanation in September, and revised in December with further detail regarding the handling of account records. The SEC wants both a PDF file containing an image of each requested document AND an electronic file as it is stored electronically by the financial institution. Subsequently, a client of ours received notice from the SEC clarifying the requirements for electronic files.
The SEC communication stated that electronic files must be delivered in one of two ways: as a delimited text file or a Microsoft Excel spreadsheet. Both must include header information detailing the field structure. Separate documents have to be submitted to detail any special codes and details of the field structure, if they don’t fit in the header.
Three Reasons to Add New Capabilities
There are three primary reasons financial institutions should heed this clarification and add this output management capability to their enterprise.
First, it will save time – and therefore money – in the event of an audit, investigation or examination. Typically, financial institutions spend weeks preparing for an audit or exam, locating documentation and individual reports to satisfy information requests from regulators. And once the audit begins, financial institutions can expect to spend additional time generating more documentation to satisfy the requests that inevitably follow. Deploying effective output management makes delivery of data faster and more efficient, allowing financial institutions to dramatically cut the amount of manual work devoted to previous research efforts.
Second, if past experience is any guide, this new SEC requirement will inspire other regulating agencies to issue their own electronic data delivery guidelines. Though we can expect similarities between the standards across the various regulatory agencies, there will still certainly be differences. By adding effective output management to their enterprise, financial institutions will be better positioned to handle any electronic data delivery requirements that they face in the future.
Third, any organization that is regulated by a government agency also knows that audit and examination requirements do not often change from year to year, so adding effective output management can also automate large portions of an organization’s delivery obligations.
Effective systems speed responses to new demands
As evidenced by the SEC’s recent data delivery requirements, more and more government regulatory agencies are requiring that data be delivered in standardized electronic formats in an effort to improve their discovery processes. While many regulatory bodies have not issued their own specific guidelines regarding electronic data delivery, it is inevitable that they will, and financial institutions will be required to adapt quickly and comply with all new standards.
Effective output management allows financial institutions to overcome the challenges, and take advantage of the opportunities, presented by this evolving compliance environment. While it is impossible to predict the future, it is paramount for financial institutions to have the tools necessary to respond quickly and accurately to these and any regulatory demand.