This is frequently called a Chinese wall, or informational firewall, referring to a virtual barrier that’s in place to stop the exchange of information that could result in illegal or ethically dubious activities. Watch the presentation or visit us for full blog about Information Sharing at https://bit.ly/3xZioOM

1. THE MANY CHALLENGES
OF INFORMATION
SHARING

2. Recently the Financial Industry Regulatory Authority hit
independent broker-dealer Cambridge Investment
Research and Merrill Lynch with fines totaling $850,000 for
failing to properly supervise employees who were involved
in the sale of mutual funds, and not properly monitoring the
exchanges between retail marketers and exchange-traded
note traders.
Notably, although Merrill Lynch did have a flagging system
in place, built around a general lexicon search, it reportedly
didn’t have sufficient reviewing practices organized —
including no process for escalating reviews of private-
public side communications that contained potential
material information, or for enforcing required measures for
separating traders and marketers in the global wealth and
global banking and markets divisions.

3. Building the Chinese wall
This highlights a major challenge when it comes to
compliance — particularly when it comes to the public and
private side employees in financial institutions. The problem
comes down to the fact that financial services firms
frequently receive and handle information that counts as
confidential or “insider” information (also known as MNPI –
or Material Non-Public Information). Traders or other
agents who possess material information that has not been
made public are prohibited from sharing it with others who
do not have a need to know, even when they may be
working on different sides of the same overall organization.
To maintain this divide, firms must erect information
barriers around proper control of the flow of non-public
information from one department to another. This is
frequently called a Chinese wall, or informational firewall,
referring to a virtual barrier that’s in place to stop the
exchange of information that could result in illegal or
ethically dubious activities.

4. The concept of Chinese walls has existed since
the 1929 stock market crash when Congress
first seriously discussed regulatory barriers
separating investment bankers and brokers.
However, the need for such divides has greatly
increased over the past couple of decades,
following the enacting of the Gramm-Leach-
Bliley Act of 1999 (GLBA). This law, which
helped empower many of today’s biggest
financial powerhouses, repealed previous
regulations that stopped firms from carrying
out combinations of investing, banking, and
insurance services.
A brief history of informational
firewalls

5. Failing to maintain this informational divide can
lead to some devastating consequences for
financial institutions. In 2003, the Securities and
Exchange Commission (SEC), National Association
of Securities Dealers (NASD), New York Stock
Exchange (NYSE), and other regulators announced
that they had agreed a massive $1.4 billion
settlement with 10 Wall Street firms for failing to
mitigate against these conflicts of interest. Two
well-known analysts were fined and given lifetime
bans from participating in the securities industry.
Among the stipulated changes were strengthened
commitments to separate divisions within banking,
to carry out extra-stringent monitoring and more.
A brief history of informational
firewalls

6. Today’s firms must be diligent in their
stance on information sharing, ensuring
that this happens only where absolutely
required and lawful. As the Merrill Lynch
example shows, having protective
measures in place when it comes to
monitoring isn’t enough.
Lexicons, referring to a simple keyword or
phrase searches, are massively outdated
tools that can cause more problems than
they solve. Lexicons yield a massive
number of false positives (FPs), inundating
system operators with high numbers of
erroneous flagged messages, making them
virtually valueless.
At Shield, we know that the world of
detection doesn’t stay still. It’s not
enough to simply set up lexicon-based
models and hope that they will catch
any potentially violating behavior that’s
thrown at them.
With that in mind, we continually add
to, modify, and otherwise improve the
detection models we used to provide
updated coverage regarding the latest
risk areas, along with new products,
areas of business, mandated lines, and
comments from regulators.
Have the right tools in place
Have the right tools in place

7. This improves the relevance of alerts, cutting down FPs,
while also detecting infringements that regular lexicon
searches or AI-only systems will miss. The technology
we have developed is able to detect any hints in
conversations between traders — or any other
personnel requiring oversight — to identify when a
potential breach is taking place. We are even capable
of building models able to analyze complex interactions
when two people are speaking in two territories with
different regulations. This is a major problem and
challenge in global operations.
By knowing the employee department, job,
management line, and other relevant information,
Shield constructs specialized models to surveil
specifically the eComm interactions between different
groups of employees like traders and marketers within
its global wealth and global banking and global
banking divisions. We combine new age lexicon
technologies, along with the latest AI innovations, to
provide the best quality surveillance system of eComms.

8. Regulations separating the two sides of
financial institutions are only going to get
more stringent as time goes on. Fines are
being handed out with increasing
regularity — and merely paying lip service
to detection through the installation of
outdated detection tools isn’t enough.
Firms must ensure that not only do they
have a strong informational firewall in
place but that they also have the
detection tools present in case someone
on either side finds a way over it.

9. Contact Us
Phone Number
97235685587
Email Address
info@shieldfc.com
Website
https://www.shieldfc.com/

10. Thank You
https://www.shieldfc.com/