Electronic communications are going to be closely scrutinized under the new law.
Those of you who are into deep pain may have already struggled through the nearly 900 pages of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. There is something in this new law for everyone--whether you want it or not! There is no doubt that business as we have all known it throughout our careers is no longer possible. The federal government is now deeply ensconced in all of our businesses, large or small and virtually regardless of what we do. Anyone who provides virtually any form of credit will have to deal with whatever comes out of the new consumer protection agency. For those of us in the financial services business, the changes are profound. Various governmental agencies from the SEC to the OCC to the Federal Reserve now have extensive powers over virtually every aspect of our business. Moreover, the new consumer protection agency will make our lives even more interesting regardless of whether we are involved in providing credit or not.
Obviously, it will be years before all of the studies mandated by the new law are complete and regulatory actions are taken to implement the findings. The administrative processes necessary to implement these new laws and regulations will likewise take an extensive amount of time to complete. It is, of course impossible in an article of this type to delve into the entire scope of the new law. However, there is one element that will affect how we all do business that we need to consider and begin to plan how we can ensure we are all in compliance.
The use of the Internet and e-mail has revolutionized how we all do business. We need only look to the dismal results from the U.S. Postal Service and the sellers of paper books to see the extent that the inroads of electronic transmittal of information have had on our traditional ways of doing business. We all communicate among our colleagues and customers using email and frequently transmit financial information in that manner. The ease, speed and reduction of expense provided by internet communication have revolutionized how we do business. While this form of communication will undoubtedly continue, we are going to be subject to ever-increasing requirements that we provide more extensive privacy protection in our electronic communications. This will require a heightened level of encryption to ensure that private information is protected from being read by unauthorized people. This level of encryption is beyond that contained in many existing systems used by financial service professionals and their companies.
The need for changes to current systems is already obvious and financial service professionals ignore them at their peril. The technical requirements for the new encryption standards have been available in the software market for quite some time. Several of the trade associations for various segments of the financial services industry have created standards that will assist in adapting current software to meet the new standards. Certainly, these new requirements will take some time to implement and it is imperative that work start as soon as possible in order that they are in place when required. Many internet retailers and other commercial users of the internet have had sophisticated encryption in place for quite some time. In addition, some of the larger players on the financial services industry that have long relied on the internet to support their businesses have also implemented encryption procedures to protect their customers that will satisfy the new requirements. It is those organizations that have not yet determined the need for updating their encryption standards that must now take steps to meet the new requirements.
Enhanced privacy standards are but one of the elements that the financial services industry must deal with during this time of change. Not since the great depression have there been such profound changes to the entire fabric of the financial services industry and to American business in general. The new law mandates numerous studies to be undertaken by the SEC, the OCC, and the Federal Reserve and by the new agencies created by the law. As the studies are concluded there will probably be modifications to the law and a flood of new regulations to implement the many changes. As the final regulations become effective, we will all have to learn to adapt. However, the encryption standards are with us today and we need to heed the obvious need to implement them if we have not yet done so.