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You Drank the Dodd-Frank Kool-Aid, but Did You Eat the WORM?

By  Erik Raper Erik Raper  on 2014-11-17 15:37:00  |  Featured in  Financial Services
Erik Raper
Posted By Erik Raper
in Financial Services
on 2014-11-17 15:37:00

dodd-frank-worm-complianceSo you’ve embraced the Dodd-Frank Act regulations but have you eaten the proverbial ‘WORM’ compliant archive? When the Dodd-Frank Wall Street Reform and Consumer Protection Act became law in 2010, it introduced a host of new requirements for financial services institutions like yours.

Dodd-Frank has famously been described by U.S. Senators Paul Ryan and Mitch McConnell as "Obamacare for banks" and has been largely met with widespread disapproval throughout the financial services community. One of the most onerous elements of this legislation is the requirement to retain records for seven years in a write-once, read-many-times (WORM) compliant format. In some cases, these records can amount to multi-terabytes or even multi-petabytes worth of data. Converting all these records to a WORM-compliant format can be a challenge, especially if your company lacks the in-house IT expertise to manage these requirements.

What Is Dodd-Frank Compliance?

The Dodd-Frank Act is intended to increase transparency of financial transactions and to establish accountability among financial services providers in the wake of several major banking and investment institution failures and the taxpayer-funded federal bail-out of major players in the banking industry.

It also requires that, in the event of a major failure, banks and financial services providers have a plan in place that outlines the way in which the shutdown will proceed. Finally, Dodd-Frank includes a provision that rewards whistle-blowers for providing information to the government regarding abuses in the financial sector.

You can learn more about Dodd-Frank Compliance best practices by visiting our blog article What Is Dodd-Frank: Ensuring Compliance Through Best Practices

Preparing your Firm for Dodd-Frank Reporting Requirements

In practice, Dodd-Frank requires institutions like yours to convert to WORM-compliant recordkeeping strategies. Especially for larger financial service providers, managing these requirements can be a major undertaking that may include:

  • Scanning printed documents to convert them to digital files
  • Transcribing voice recordings into a digitally readable format
  • Associating various items from the same transaction together for easier retrieval
  • Creating secure, searchable WORM compliant storage for all relevant records over the past seven years
  • Establishing tiered access to current and past financial records to comply with privacy regulations
  • Setting up time-oriented disposal of older documents that exceed the seven-year threshold

Many of these tasks must be completed before conversion of all documentation to one common format can begin. Fast and efficient retrieval of the records required by Dodd-Frank provisions can be most easily accomplished by storing all such documents in a common database. Even after the initial stages of Dodd-Frank compliance activity have been completed, many challenges remain for companies in the financial services sector.

Dodd-Frank Title VII Challenges

WORM-compliant solutions must meet a number of specific criteria:

  • They must be easily searchable to allow fast retrieval of requested records
  • Records must be readily accessible to authorized personnel
  • Data must be secured to prevent unauthorized access
  • All records within the seven-year required retention period must be available for release to appropriate agencies within the prescribed 72-hour turnaround time

Meeting these criteria is complicated by a number of factors. One of the most important is the different storage formats for relevant data:

  • Email messages
  • Voice recordings
  • Printed documentation in a range of formats, including contracts, blotters and notes
  • Instant messages
  • Both structured and unstructured data

No one conversion method can be applied to all these data types. Since each of these formats may be relevant to a specific derivative trade transaction or swap, the task of achieving WORM-compliant data storage for seven years of records can be daunting for even the best-organized financial services institution.

Transcribing recorded data and scanning printed documents can take a considerable amount of time in its own right; converting all these documents into a format that can be read, searched and organized for faster retrieval requires expert IT help to ensure full compliance with Dodd-Frank requirements. Further, these records must be stored securely to protect client confidence and to keep sensitive financial information out of the hands of unauthorized personnel.

XML Solutions

Implementing a data archival solution based on XML can help reduce some of the issues with compatibility and interoperability for record information. XML-based systems offer easier search and retrieval of records and can be combined with automatic digital document shredding programs that can remove data after the seven-year period has elapsed.

Maintaining full compliance with all requirements of the Dodd-Frank Act can reduce the likelihood of federal intervention and action against your financial services company. Additionally, storing your records in an XML-based format can ensure easier access to necessary information for your staff members and can streamline your record-keeping processes for the future.

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Erik Raper

Erik Raper

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Erik Raper heads Paragon’s Marketing and Advisory Services teams across focused industries. In this role, Mr. Raper leads his team to bring deep industry experience, rigorous analytical capabilities and a pragmatic mindset to clients’ most complex business problems. Mr. Raper’s team of marketing and strategy professionals work with Paragon’s Industry Leaders in the development of key go-to-market solutions which align to Paragon strengths and are essential to achieving clients’ business imperatives.

Before being appointed to his current position, Mr. Raper has served several key roles at Paragon including Director of Strategic Solutions Sales, Vice President of Strategy, and leader of Advisory Services. Mr. Raper guided the development of a suite of straight-through-processing (STP) solutions that focused on delivering business value–expanding Paragon’s Fortune 500 clientele and establishing the foundation for the firm’s brand platform: "Improving the Way Work Gets Done."

Prior to his appointment at Paragon in 2004, Mr. Raper spent seven years with Prudential Financial. As a vice president, he was instrumental in leading Prudential through a major operations and technology re-engineering in support of the company’s initial public offering. Preceding his employment with Prudential, he spent seven years with AT&T in various Marketing and Strategic Planning positions.

Mr. Raper holds a B.A. in Marketing from Columbus University, Metairie, Louisiana.

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