Transparency, Compliance, and Data Protection: Adapting to New Regulations in the Financial Industry

Published On: April 30, 2024Categories: Blog

The regulatory landscape for financial services firms is undergoing a significant shift, with the introduction of the Corporate Transparency Act (CTA), new SEC rules on disclosure of stock options granted in proximity to material nonpublic information (MNPI) disclosure, and the SEC’s new disclosure rule about data breaches. These regulations reflect a broader trend towards increased transparency, compliance obligations, and data protection in the financial services industry.

To successfully navigate this new landscape, firms must take a proactive and strategic approach to regulatory compliance. Fortunately, innovative solutions like Inventa can help financial services firms streamline their compliance efforts by automating data discovery, classification, and protection across their entire data landscape.'s role in maintaining regulatory compliance for financial services firms

Corporate Transparency Act (CTA)

The CTA, which took effect on January 1, 2021, requires certain companies to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The goal is to combat money laundering and other illicit activities by increasing transparency around corporate ownership structures.

Navigating CTA Compliance Challenges

For financial services firms, the CTA presents significant compliance challenges. They must determine whether they qualify as a “reporting company” under the law and, if so, identify their beneficial owners and gather the required information. Firms that are required to report under the CTA will need to file an initial report with FinCEN within one year of the law’s effective date (by January 1, 2025) and then update that report annually. Failure to comply can result in civil penalties, criminal fines, and even imprisonment.

To navigate these challenges, financial services firms should conduct a thorough analysis to determine their reporting obligations, develop processes for identifying and verifying beneficial owners, establish systems for tracking and reporting changes in beneficial ownership, and train employees on the requirements of the CTA.

SEC Rules on Disclosure of Stock Options Granted in Proximity to MNPI Disclosure

The SEC’s new rules on disclosure of stock options granted in proximity to material non-public information (MNPI) disclosure aim to prevent insider trading by requiring public companies to disclose information about the timing of stock option grants to executives and directors in relation to the disclosure of MNPI.

Strengthening Insider Trading Prevention Programs

Under the new rules, which go into effect for fiscal years beginning on or after April 23, 2023, companies will need to disclose in their annual reports and proxy statements any stock option grants made to named executive officers or directors within 14 days before or after the disclosure of MNPI.

For financial services firms, these rules present both compliance challenges and opportunities to strengthen insider trading prevention programs. Firms will need to establish processes for tracking the timing of MNPI disclosures and stock option grants, develop policies and procedures for reviewing proposed stock option grants, train insiders on their reporting obligations, and review and update insider trading policies to ensure alignment with the new disclosure requirements.

SEC’s New Data Breach Disclosure Rule

In March 2023, the SEC proposed new rules that would require public companies to disclose material cybersecurity incidents within four business days of determining that an incident is material. The proposed rules would also require companies to provide periodic updates on previously disclosed incidents and to disclose their policies and procedures for identifying and managing cybersecurity risks.

Enhancing Cybersecurity Risk Management and Incident Response

For financial services firms, which are prime targets for cyber attacks, the proposed rules underscore the importance of robust cybersecurity risk management and incident response programs. To prepare for the new requirements, firms should assess their current cybersecurity policies and procedures, develop a clear framework for determining the materiality of cybersecurity incidents, establish an incident response plan, train employees on cybersecurity best practices, and consider engaging third-party experts to assess their cybersecurity posture.

Maintaining Compliance with Inventa

As financial services firms navigate this new regulatory landscape, they must also contend with the challenges of managing sensitive data across complex organizational structures and ensuring compliance with a wide range of privacy regulations. This is where Inventa comes in.

Streamlining Compliance Efforts with Contextual Data Intelligence Inventa is a data discovery and governance platform that combines advanced AI, automation, and contextual intelligence to accurately map, classify, and control sensitive data across an organization’s entire hybrid data estate. Inventa goes beyond simple classification by leveraging advanced AI to understand the context and lineage of data, enabling informed decisions that balance business innovation with regulatory compliance.

With Inventa, financial services firms can automate the discovery and classification of sensitive data, assess their compliance risks, and enforce data protection policies across all their data stores and systems. Inventa’s contextual intelligence allows firms to understand how data flows through their organization, identify potential risks, and make informed decisions about data usage and access.

By leveraging Inventa, financial services firms can ensure they have a complete and accurate picture of their sensitive data assets, including beneficial ownership information required under the CTA. They can also use Inventa to monitor for potential insider trading risks by identifying patterns of access to MNPI and correlating that with stock option grant activity.

In the event of a data breach, Inventa can help financial services firms quickly identify the scope and impact of the incident, facilitating timely disclosure to regulators and investors in accordance with the SEC’s proposed data breach disclosure rules.

Inventa streamlines and automates data lifecycle management, aligning with corporate policies and regulations. It enables scalable policy enforcement, allowing organizations to establish and maintain granular data governance policies across their hybrid environment, ensuring consistent application and auditability of policies, thereby reducing manual effort and enhancing compliance at scale.

Mastering Regulatory Compliance in the Financial Services Industry

In this era of rapid regulatory change, financial services firms must be proactive, agile, and strategic in their approach to compliance. To help you stay ahead of the curve, we’ve created a comprehensive white paper, “Securing the Future: Advanced Compliance and Cyber Resilience in Financial Services.” The paper provides valuable insights into the evolving regulatory environment, industry trends, cybersecurity challenges, privacy priorities, and compliance complexities facing financial services firms.

Don’t miss this opportunity to equip yourself with the knowledge and tools needed to thrive in the face of regulatory challenges. Download “Securing the Future: Advanced Compliance and Cyber Resilience in Financial Services” today and take a proactive step towards mastering regulatory compliance in the financial services industry.