INSTITUTIONAL PRESSURES ON FINANCIAL SERVICES FIRMS: THE ROLE OF INFORMATION SYSTEMS IN REGULATORY COMPLIANCE

The financial crisis of 2008 led to new international regulatory controls for the governance, risk and compliance of financial services firms. Information systems play a critical role here as political, functional and social pressures may lead to the deinstitutionalization of existing structures, processes and practices. This research examines how an investment management system is introduced by a leading IT vendor across eight client sites in the post-crisis era. Using institutional theory, it examines changes in working practices occurring at the environmental and organizational levels and the ways in which technological interventions are used to apply disciplinary effects in order to prevent inappropriate behaviors. The results extend the constructs of deinstitutionalization and identify empirical predictors for the deinstitutionalization of compliance and trading practices within financial organizations

THE ROLE OF RULES-BASED COMPLIANCE SYSTEMS IN THE NEW EU REGUALTORY LANDSACPE: PERSPECTIVES OF INSTITUTIONAL CHANGE AND AGENCY

The financial crisis of 2007-2009 and the subsequent reaction of the G20 have created a new global regulatory landscape. Within the EU, change of regulatory institutions is ongoing. The research objective of this study is to understand how institutional changes to the EU regulatory landscape may affect corresponding institutionalized operational practices within financial organizations and to understand the role of agency within this process. Our motivation is to provide insight into these changes from an operational management perspective, as well as to test Thelen and Mahoney?s (2010) modes of institutional change. Consequently, the study researched implementations of an Investment Management System with a rules-based compliance module within financial organizations. The research consulted compliance and risk managers, as well as systems experts. The study suggests that prescriptive regulations are likely to create isomorphic configurations of rules-based compliance systems, which consequently will enable the institutionalization of associated compliance practices. The study reveals the ability of some agents within financial organizations to control the impact of regulatory institutions, not directly, but through the systems and processes they adopt to meet requirements. Furthermore, the research highlights the boundaries and relationships between each mode of change as future avenues of research

Equity crowdfunding and early stage entrepreneurial finance: damaging or disruptive?

Equity crowdfunding (ECF) offers founders of new ventures an online social media marketplace where they can access a large number of investors who, in exchange for an ownership stake, provide finance for business opportunities that they find attractive. In this paper, we first quantify the evolution of the ECF market in the UK, the world leader, as well as the benign regulatory environment. ECF already represents more than 15% of British early stage entrepreneurial finance. We then use qualitative methods to explore three research questions. First, do these large financial flows via ECF platforms supplement or merely divert more traditional forms of funding for entrepreneurs? Second, do investors understand and appropriately evaluate the risks that they are bearing by investing in this new asset class? Finally, does ECF finance bring with it the spillovers, e.g. advice and guidance critical to entrepreneurial success, associated with other sources of funding such as Venture Capital? Our study is based on extensive interviews with investors, entrepreneurs (including some who chose not to use ECF in favour of traditional funding sources) and regulators. We conclude that ECF provides real additionality to the sources of entrepreneurial finance while not bringing major new risks for investors. This suggests other jurisdictions might consider implementing the British “principles based” regulatory framewor

A post financial crisis study of compliance practices and systems in global financial organizations: an institutionalist perspective

The financial crisis of 2007–2009 and the resultant pressures exerted on policymakers to prevent future crises have precipitated coordinated regulatory responses globally. As a result, large scale regulatory change is being enacted within this industry to protect investors and economic systems. Very little research exists, either prior to the crisis or since, on how compliance practices are managed through technology within financial organizations. The research objective of this study is to understand how institutional changes to the regulatory landscape may affect corresponding locally institutionalized operational practices within financial organizations. The study adopts an Investment Management System (IMS) as its case and investigates different implementations of this system within eight financial organizations, focused on investment activities within capital markets. This study makes a contribution by outlining a detailed review of this technology and identifying post-crisis practices for organizing compliance and the social forces influencing them through technology. Through symbolic systems, relational systems, routines and artefacts the IMS diffuses new compliance practices and further embeds existing ones. The study shows that this system is not objective and is currently in flux as this dynamic and complex environment evolves in the wake of the global financial crisis. Correspondingly, social, political and functional pressures are acting to deinstitutionalise related behaviours and practices. Yet compliance behaviours and practices are simultaneously being institutionalised through coercive, normative and mimetic mechanisms. However, the study also highlights the ability of some agents to exercise limited control on the impact of regulatory institutions. The research found evidence that some older practices persisted and so the study suggests that the institutionalization of technology induced compliant behaviour is still uncertain. The research makes an additional contribution to practitioners by distilling the findings into a model of IS capabilities for compliance and a model to measure the maturity of a firm’s compliance capabilities

Catching the Banksters: The Use of Big Data Analytics in Billion Dollar Regulatory Investigations

Following the financial crisis, emboldened regulators have increased the magnitude of fines levied for financial malfeasance. The automation of the data discovery process underpins the rise in internal investigations, which financial organizations are obliged to conduct on the behest of regulators, keen to reduce information asymmetries and bolster transparency. Yet little research exists into the technologies which underpin post-crisis regulatory agendas. Our study focuses on big data technologies (eDiscovery tools) which facilitate investigations, where rare yet serious breaches have occurred. We focus on the micro/data level (volume, veracity, variety and velocity) to understand how these tools are influencing regulatory outcomes. The findings illustrate the need for financial organizations to adopt robust information governance policies to ease future investigatory efforts. We identify various practices which may help compliance managers better respond to regulatory investigations faster and more easily to ease the burden of post-crisis regulation

Value Co-creation in Fintech Ecosystem: A Case Study of Australia

The development of the Fintech Ecosystem brings radical socio-economic value by increasing entrepreneurship, innovation, and financial inclusion. Yet, there is a lack of knowledge regarding how value is co-created among the actors in the Fintech Ecosystem. The research objective is to conduct an in-depth case study in the Australian Fintech Ecosystem to explore the processes and mechanisms of value co-creation. Our study develops a framework for understanding value co-creation facilitated through digital affordance infrastructure. The study has several potential theoretical contributions to the literature on Fintech Ecosystem development by providing insights into antecedent conditions, mechanisms, paradoxical tensions, and outcome attributes derived from the framework. For practitioners, our framework could assist regulators and organizations within the ecosystem in gaining a deeper understanding of the processes necessary for continued success. Regulators could adjust the intensity of controls in response to environmental uncertainties and tensions

Dialectic tensions in the financial markets: a longitudinal study of pre- and post-crisis regulatory technology

This article presents the findings from a longitudinal research study on regulatory technology in the UK financial services industry. The financial crisis with serious corporate and mutual fund scandals raised the profile of compliance as governmental bodies, institutional and private investors introduced a ‘tsunami’ of financial regulations. Adopting a multi-level analysis, this study examines how regulatory technology was used by financial firms to meet their compliance obligations, pre- and post-crisis. Empirical data collected over 12 years examine the deployment of an investment management system in eight financial firms. Interviews with public regulatory bodies, financial institutions and technology providers reveal a culture of compliance with increased transparency, surveillance and accountability. Findings show that dialectic tensions arise as the pursuit of transparency, surveillance and accountability in compliance mandates is simultaneously rationalized, facilitated and obscured by regulatory technology. Responding to these challenges, regulatory bodies continue to impose revised compliance mandates on financial firms to force them to adapt their financial technologies in an ever-changing multi-jurisdictional regulatory landscape

COOL-LAMPS III: Discovery of a 25".9 Separation Quasar Lensed by a Merging Galaxy Cluster

In the third paper from the COOL-LAMPS Collaboration, we report the discovery of COOL J0542-2125, a gravitationally lensed quasar at $z=1.84$, observed as three images due to an intervening massive galaxy cluster at $z=0.61$. The lensed quasar images were identified in a search for lens systems in recent public optical imaging data and have separations on the sky up to 25".9, wider than any previously known lensed quasar. The galaxy cluster acting as a strong lens appears to be in the process of merging, with two sub-clusters separated by $\sim 1$ Mpc in the plane of the sky, and their central galaxies showing a radial velocity difference of $\sim 1000$ km/s. Both cluster cores show strongly lensed images of an assortment of background sources, as does the region between them. A preliminary strong lens model implies masses of $M(<250\ \rm{kpc}) = 1.79^{+0.16} _{-0.01} \times 10^{14} M_{\odot}$and$M(<250\ \rm{kpc}) = 1.48^{+0.04}_{-0.10} \times 10^{14} M_{\odot}$ for the East and West sub-clusters, respectively. This line of sight is also coincident with a ROSAT ALL-sky Survey source, centered between the two confirmed cluster halos reminiscent of other major cluster-scale mergers.Comment: 13 pages, 6 figures. Submitted to Ap

COOL-LAMPS. IV. A Sample of Bright Strongly Lensed Galaxies at 3 < z < 4

We report the discovery of five bright, strong gravitationally lensed galaxies at 3 < z < 4: COOL J0101+2055 (z = 3.459), COOL J0104−0757 (z = 3.480), COOL J0145+1018 (z = 3.310), COOL J0516−2208 (z = 3.549), and COOL J1356+0339 (z = 3.753). These galaxies have magnitudes of rAB, zAB < 21.81 mag and are lensed by galaxy clusters at 0.26 < z < 1. This sample nearly doubles the number of known bright lensed galaxies with extended arcs at 3 < z < 4. We characterize the lensed galaxies using ground-based grz/giy imaging and optical spectroscopy. We report model-based magnitudes and derive stellar masses, dust content, and star formation rates via stellar population synthesis modeling. Building lens models based on ground-based imaging, we estimate source magnifications ranging from ∼29 to ∼180. Combining these analyses, we derive demagnified stellar masses in the range ${\mathrm{log}}_{10}({M}_{* }/{M}_{\odot })\sim 9.69-10.75$ and star formation rates in the youngest age bin in the range ${\mathrm{log}}_{10}(\mathrm{SFR}/({M}_{\odot }\,{\mathrm{yr}}^{-1}))\sim 0.39-1.46$, placing the sample galaxies on the massive end of the star-forming main sequence in this redshift interval. In addition, three of the five galaxies have strong Lyα emissions, offering unique opportunities to study Lyα emitters at high redshift in future work

The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market

Equity crowdfunding (ECF) offers entrepreneurs an online social media marketplace where they can access numerous potential investors who, in exchange for an ownership stake, may supply them with finance. In this paper, we describe the evolution of this market in the UK. Using an inductive qualitative longitudinal research design, we analyse the emerging views of entrepreneurs and investors towards ECF. Our interviewees include large and small-scale investors, as well as market participants who have chosen not to invest or raise funds via ECF. We find that the large financial flows to entrepreneurs in the UK via the ECF platforms, nearly half a billion GBP since 2011, have probably been largely incremental to traditional sources of early stage entrepreneurial finance. Moreover, our research indicates that for the most part, investors appear to understand and appropriately evaluate the risks that they are bearing; ECF investments are perceived as a high risk, high return component within individuals’ portfolios. Investors also use their communication with peers and entrepreneurs via the ECF platform as a learning tool. On the entrepreneurs’ side, ECF allows them to test their products, to develop their brand, to build a loyal customer base and to turn customers into investors. We conclude that policymakers, with the support of a locally appropriate regulatory framework, could support equity crowdfunding as one of the market choices available for entrepreneurs looking to start or grow their ventures