Q & A: The Past, Present and Future of RegTech

January 24, 2019 11:00 am Published by
We’re kicking off our new ISDR Q & A series with our very own CEO, Brian Balbirnie.
Balbirnie has decades of experience in regulatory compliance and corporate communication. In order to simplify the SEC-filing process, he started Issuer Direct Corp. in 2006. He created a single-source vendor and the first regulatory self-filing platform to the SEC.
Over the years, he has grown Issuer Direct into one of the largest complete-platform plays for the public company market place.
Behind his leadership, ISDR has garnered numerous awards, including being named to the Deloitte Fast 500.
Balbirnie recently shared his insight behind RegTech changes and what to look for in 2019.
Q: What are the changes you’ve seen in RegTech (regulation technology) from when it began to now?

A: When we started the business back in 2006, neither RegTech nor cloud computing in the financial service space were a thing. So there’s been a significant amount of changes to get us to RegTech today. Specifically, automation and digitization of manual reporting and compliance processes. A great example of that is the offering process or raising of capital. Ten-plus years ago, lawyers drafted documents to be filed with the SEC, and printed and mailed to bankers and investors. The investment documents, forms and processes were very cumbersome. Fast forward to today: The same lawyers draft these documents that have been standardized to what the industry knows as REG-A+, the SEC opines to these filings, and the companies put them online with a marketing campaign and raises capital directly with investors without the need for an investment bank in some cases. The addition of the digitization technologies such as KYC (know your customer) digital signing technology, AML (Anti-Money Laundering rules) and a RegTech platform such as ours allows the potential of capital raising to be conducted in real-time while complying with regulatory compliance laws.


Q: Looking toward the future, what are some trends you’re keeping your eye on that could make an impact in the industry?

A: Big data, AI and insight. Increasingly, practitioners and companies understand that big data and the insights that can be gained from it can help shape and tell their stories better than ever. For the last couple years, we’ve been gathering data, engagements and fingerprinting sessions, then analyzing them to one day give to our customers. These types of interactions are critical in the storytelling process. A practitioner can quickly see who downloaded, viewed and listened over a wide variety of content and defined period. This workflow or platform pattern matching is critical to engagement and something every company and executive should have insight into. If done correctly and transparently with the utmost of privacy concerns, we feel this can impact the industry we serve in a meaningful way.


Q: There’s a lot more news about FinTech (financial technology) and RegTech lately. What do you think started the industry push?

A: The defining moment that FinTech and RegTech’s development took a step forward was the global financial crisis in 2008. Currently, FinTech is in rapid development due to the uptick in startups and other new industries that have entered, like IT and e-commerce firms, and broken up the financial services market. The current FinTech climate presents new challenges for regulators and shows how similar the development in FinTech and RegTech are. Today, RegTech developments are moving toward another paradigm shift, which will be marked by a change in the nature of financial regulation.


Q: Switching to the IR (investor relations) side, what are some things that investors should look out for in 2019?

A: IR has changed, and there’s no turning back. The new IR landscape should be transparent and in real-time. No doubt Regulation Fair Disclosure will evolve to allow for additional ways for companies to share and deliver their messaging long term. But short term, this year, it’s going to be about trends, engagement and the like. For the first time this year, our customers will understand the true engagement of a stakeholder. We can view stakeholders to be shareholders, investors, customers, media and interested party. Who viewed my press release, who listened to my earnings calls, who asked questions, who left the call, who downloaded my investor kit and/or media kits, who is a shareholder, and whom did I meet at an event? These are all questions every company asks their IR and PR teams. Inevitably, it’s about the results. Professionals in the space need dependability and true accurate engagement. We’re a platform that will help the industry understand these entry points of engagement, good or bad. Our objective is to improve access and understanding of the information, not to create the engagement.


Q: If you’re a company searching for investors, what are a few ways that it has changed? And what are the best ways to begin if you’re a startup?

A: Startups today need to have a comprehensive business plan, strategy and clear message. Then, they need to tell their story to anyone who will listen, and build brand, trust and momentum. Believing they don’t need to do this and trying to find investors first is a big mistake. In many cases, investors want to see a founder deliver on his or her strategy before they consider investing. Now don’t get me wrong, there are exceptions: Proven entrepreneurs get instant credibility from investors if they have been there, done that before.
But for most, platforms like SeedInvest and Fundable are two good options for companies to turn to in order to extend their story to investors. Additionally, finding an Investment Banker or consultant that is registered with FINRA (Financial Industry Regulatory Authority) to assist in an offering process could be helpful if you don’t have a lot of experience in raising money.
Additionally, there are databases one can license that gives access to investors — either in a crowd-sourced way or direct one-to-one relationship building. These actions can be effective but time consuming for startups. Many times, public companies and/or more established private companies will go this route because the cost of capital ratio is worth it for them.

We hope you enjoyed the first in our Q & A series, in which we interview industry experts on topics that matter to you.