FINRA Seeks Comments on Machine-Readable Rulebook Initiative
The U.S. House of Representatives recently held a hearing to examine areas where banking regulations can be updated to align with existing and emerging technologies; the consumer data privacy and breach notification frameworks (the Financial Data Privacy Bill); barriers to entry for de novo banks and impacts on competition in community banking; and increasing lack of transparency and accountability in bank regulation and supervision. The industry bodies in US are also looking at ways to use new technologies to aid in regulatory and supervisory activities. For instance, the Financial Industry Regulatory Authority (FINRA) recently launched a prototype of a machine-readable rulebook to automate compliance functions and reduce compliance time and costs. FINRA is seeking comments on this initiative until February 21, 2023.
FINRA has begun developing a machine-readable rulebook to assist users to more readily analyze and search the rules of FINRA. As part of this initiative, FINRA is creating an embedded taxonomy (which is a method of classifying and categorizing a hierarchy of key terms and concepts) within certain FINRA rules, which can be more easily processed by a computer and, therefore, potentially less time-consuming and costly for a firm’s legal and compliance staff to review. FINRA applied, or “tagged,” the taxonomy terms that were developed to 40 FINRA rules, representing the most frequently viewed rules. FINRA also created a prototype of a rulebook search tool—the FINRA Rulebook Search Tool™ (FIRST™). FINRA is launching the FIRST search feature through a user interface on the FINRA website.
FINRA is also offering access to the taxonomy terms that have been tagged to each of the 40 rules through an Application Programming Interface (API). The API enables users to receive rule content, including the taxonomy terms tagged to each of the 40 rules. These may be mapped to internal compliance systems and can facilitate the development of automated compliance tools. This feature enables member firms seeking to automate compliance functions to link the FINRA rule content and the taxonomy terms to their internal compliance policies and procedures. FINRA is soliciting comments on the machine-readable rulebook initiative, including the development of the taxonomy, the enhanced search features available through FIRST, the content available through the API, and any potential benefits or challenges associated with the overall user experience.
Related Links
- FINRA Machine-Readable Rulebook Initiative
- Comment Request on FINRA Initiative
- Hearing on Banking Regulations
Keywords: Americas, US, Banking, Legislative Bill, CBLR, Basel, Financial Services Committee, Taxonomy, Machine-Readable Rulebook, Regtech, Suptech, US House Committee on Financial Services, FINRA
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