Industry News: June 2024
The June 2024 Fintech News roundup features a recent FDIC warning, AI advancements, new fintech collaborations, and more – giving you a quick overview of what’s shaking the financial services industry and why it matters to you and your clients.
BlackRock and Citadel Securities Announce the Texas Stock Exchange
What happened: BlackRock and Citadel Securities are spearheading the launch of the Texas Stock Exchange (TXSE) in Dallas, securing around $120 million in funding to compete with the NYSE and Nasdaq.
Why it matters: Set to begin operations as early as 2026, TXSE aims to offer more cost-effective and business-friendly listing and trading options, providing a viable alternative to the stringent compliance regulations of established exchanges. This new player could attract companies and innovators seeking reduced compliance burdens and pave the way for significant industry advancements, undoubtedly shaking up the investment landscape.
Consumers are Warned to Take Caution with Neobanks and Fintech Providers Lacking FDIC Insurance
What happened: In early June 2024, the FDIC issued a new warning for consumers: Be wary of banking with neobanks and fintech companies that fall outside FDIC protections when selecting your bank, especially in light of Synapse Financial Technologies’ bankruptcy.
Why it matters: It’s estimated that over one million Americans were left unable to access their funds after Synapse shuttered its doors. Many of those individuals may not have even been fully aware that their “banks” were actually third-party apps that simply connected banking institutions for consumers. The warning underscores a need for more transparency between fintech companies, banks, and the people they serve, and likely signals increased regulatory focus heading to that section of the financial services industry.
JP Morgan Jumps Aboard the AI Train with IndexGPT
What happened: JPMorgan Chase has launched IndexGPT, an AI tool that uses OpenAI’s GPT-4 model to create thematic investment baskets.
Why it matters: By automating the creation of thematic indexes through keyword association, IndexGPT will facilitate a more efficient approach to identifying and investing in trends like cloud computing or cybersecurity, potentially enhancing portfolio performance and pushing for more innovation within the industry?. Some experts, however, say that only time will tell if IndexGPT has a long-term place among the lineup of AI-fueled systems currently flooding the finance sector.
Related: What Software Will Financial Advisors Use in 2024?
Fiserv and Plaid Partner to Enhance Secure Data Sharing in Finance
What happened: Fiserv and Plaid announced a partnership in late 2023 aimed at improving the security and efficiency of data sharing for consumers through API connectivity.
Why it matters: Through this new collaboration, over 3,000 financial institutions hosted by Fiserv and 8,000 applications and services connected via Plaid can offer more robust and secure services to their clients who wish to share financial information with third parties. The sheer scale of the partnership highlights just how crucial API-driven connectivity is in the modern financial services world – opening the door for faster, more reliable, and more secure data sharing.
The SEC Charges Broker-Dealers and Investment Advisors Over Recordkeeping Failures (Again)
What happened: In February 2024, the SEC brought over $81 million in new charges against broker-dealers and investment advisors for failing to properly maintain records of off-channel communications, such as those conducted via WhatsApp and other text messaging platforms.
Why it matters: This crackdown is another in a string of charges against off-channel communications betweens advisors and their clients in recent years. As technology evolves and new communication methods become available, it’s critical that your firm practices due diligence and devotes the resources necessary to comply with recordkeeping rules. If not, the message from the SEC is clear: Regulators are keeping their focus on off-channel comms, and those that flout the rules will continue to incur penalties.
Related: Nitrogen Helps Independent RIA & Broker-Dealer with $3B+ AUM Set the Bar for Fiduciary Care
CFP Board Reaches Milestone with Over 100,000 Certified Members
What happened: The Certified Financial Planner (CFP) Board has announced that it now has over 100,000 certified members, marking a significant milestone in its mission to promote high standards of professional conduct in financial planning.
Why it matters: No matter what new threat seems to emerge to challenge advisors — from robo-advice to AI — the industry continues to make gains. In fact, the Bureau of Labor Statistics still predicts faster-than-average growth for financial advisory employment – and this milestone reflects that growth. It also underscores the recognition and importance of the CFP certification, which enhances credibility, ensures adherence to rigorous ethical and professional standards, and gives professionals access to a large network of other certified planners for peer learning.
TradeZero Fined $250K for “Finfluencer” Activities
What happened: Brooklyn-based brokerage firm TradeZero has been fined $250,000 by regulatory authorities for compliance failures related to its promotion of financial products through social media influencers, commonly known as “finfluencers.”
Why it matters: The TradeZero fine serves as an important reminder: Influencers and other forms of social media outreach can be an effective way to reach your target audiences – but those partnerships can also put your firm at regulatory risk. Before hiring a “finfluencer” to promote your next campaign, it’s critical that you set clear expectations and guidelines, while also monitoring all content in regards to compliance (paying particular attention to any necessary disclosures and keeping language fair and balanced).