A marketplace lender agreed to pay a $3 Million fine for overstating returns because of coding errors. The SEC asserts that the firm’s legacy coding omitted charged-off loans from historical performance calculations once the charged-off loans were sold to a third party. According to the SEC, the firm knew as far back as 2014 that its legacy code had significant issues but failed to fix the code affecting the return calculations. The firm used the inflated returns in client reporting and marketing.
As firms implement FinTech and RegTech, they cannot simply set it and forget it. Compliance, operations, and IT personnel must work together in real time to ensure that systems reflect current regulatory requirements. Technology is a great tool, but it is not the complete answer to regulatory compliance.