Written by a human
The Financial Data Transparency Act will develop the way that data is collected, shared and stored among agencies in order to ensure they’re all operating the same way.
“It will make financial data collected by the Agencies more accessible, uniform, and useful to the public”, SEC Chair Gary Gensler, said in his recent announcement on the incoming regulation.
Learn about the requirements of this Financial Data Transparency Act regulation, and why embracing the change might bring a sense of harmony to your partnerships and collaborations.
What is the proposed Financial Data Transparency Act?
The Financial Data Transparency Act (FDTA) was initially proposed in December 2022 by a large group of US agencies. The group includes:
- Office of the Comptroller of the Currency
- Federal Reserve
- Consumer Financial Protection Bureau
- Securities and Exchange Commission and more
The FDTA aims to standardize inter-agency operations, ensuring that each department uses the same data collection, storage, and transmission methods. This should make it easier for US government agencies to work with one another, while still ensuring that they meet regulatory obligations.
What’s the timeline?
The Financial Data Transparency Act was officially enacted in December 2022 as part of the reforms for the Financial Stability Act, under Dodd Frank.
On August 2nd 2024, the joint standards proposal was published. Agencies were given 60 days to comment on the proposed rules before they’re set in stone. In the future, final data standard rules are likely to be implemented by December 2024 and will need to be adopted by December 2026.
Why was it proposed?
The FDTA was proposed because of the current problems with inter-agency collaboration. With various agencies using their own internal rules and standards, data types are often incompatible, rendering partnerships slow and painful.
By creating joint standards, methods and characteristics, agencies can streamline their reporting by sharing information (including sensitive financial information) with one another. The Data Act will also ensure knowledge is machine-readable and searchable, which is better-suited to modern times. Without the risk of inconsistencies, collaborations will become faster and government agencies will save on the cost of painful information mismatches. Finally, the FDTA was proposed in order to guarantee that agencies will satisfy regulatory requirements, especially for complex matters such as digital metadata.
What might be some of the requirements for compliant companies?
Based on the proposed rules, we know that there are a wide range of structured data standards to change, including:
- Legal entity identifiers
- UPI and CFI
- FIGI
- Dates
- States and countries
- Currencies
- General Data standards
Legal entity identifiers
Currently in the US, the legal entity identifier (LEI) system has been adopted by regulators like the SEC and FED. Organisations are given a unique 20-digit code which identifies their business globally. But obtaining (and renewing) an LEI comes with significant costs, as the system is based on a cost-recovery model.
The proposed FDTA change would open up the LEI database to any user with a free licence. It would make the international organisation for standardization (ISO) standards compulsory among US agencies.
UPI and CFI
Swaps and securities-based financial products are currently regulated by the SEC, and this regulation aims to bring them under a Unique Product Identifier (UPI). This will match one of the ISOs, and other financial products will come under the Classification of Instruments (CFI) code, as per another ISO.
The aim with bringing these financial products under ISOs is to provide global transparency in assets, making it clearer for investors. Moreover, aggregating the data will make it easier for foreign firms to offer US investment packages.
FIGI
FIGI stands for Financial Instrument Global Identifier. It’s an already existing classification system which will be adopted by US government agencies under the Financial Data Transparency Act.
This system was chosen since it’s already free and provides coverage in all sorts of asset classes which are not currently defined in the US, such as loans.
Dates
The Financial Data Transparency Act will set a standard for written dates, making it easier for machines to read, transmit and operate data. The Act will adopt another ISO to standardize the order of taxonomy:
- Year
- Month
- Day
- Hour
- Minute
- Second
- Millisecond
For example, 10am on the 5th of April 2009 would become 2009-04-05 10.00.00.000.
The rationale behind this standardization of dates is to help machines read digital data, such as web pages, online documents, and workplace portals.
States and Countries
For similar machine-readability purposes, States will no longer be referred to by alphanumeric codes. Instead, the FDTA will require government agencies to use the Postal service system, which abbreviates States into two-letter codes.
Here are some examples:
| State | Code |
| Alabama | AL |
| Alaska | AK |
| Arizona | AZ |
| Arkansas | AR |
Similarly, countries will follow the US’ interpretation of ISO 3166 for referring to country codes. The existing method for this is known as Geopolitical Entities, Names and Codes (GENC). For example, the United Kingdom’s GENC code is GBR.
Currencies
Likewise, the adoption of currency standards will follow an existing ISO standard (4217). This aims to increase clarity when referring to foreign currencies.
Here are some examples:
| Currency | Code |
| Albania Lek | ALL |
| Belize Dollar | BLZ |
| Liechtenstein Swiss Franc | CHF |
| Sudanese Pound | SDG |
By simplifying the way that currency is referred to among US agencies, the Financial Data Transparency Act will decrease the risk of errors as data is transmitted.
Standardization is on its way
While it might feel like a long time coming, the FDTA is making progress at a good pace. Don’t let these standards creep up on your business without preparation.
As the regulators seek to improve transparency and collaboration, agencies will find that the quality of their data will become better than ever. And with the proposed open license system, your performance will be on view.
The regulatory communication experts at Global Relay are here to support your team on setting up your information taxonomy, ensuring that the data satisfies machine readability standards, and satisfying the regulatory requirements.
Speak to a member of the dedicated Global Relay team.
*all codes correct as of 30/08/2024