Exploring the Compliance Process of Expert Insights

Over the past decade, the financial services industry has observed fundamental investment analysis evolve as a result of technological advances. For compliance professionals, these technological changes have required the development of new policies, novel procedures, innovative forms of surveillance, and distinctive compliance testing techniques. 

Many investment analysts leverage expert calls for comprehensive research; however expert calls come with the risk of exposure to confidential or material non-public information (MNPI). This risk can potentially inhibit a firm’s ability to trade on related positions, yet without expert calls, investment firms could miss out on important information, opportunities, and investment ideas.

AlphaSense is a leading market intelligence platform that has disrupted the expert call landscape with its Expert Insights solution of an on-demand expert transcript library and one-on-one call services. Below, we explore the compliance of Expert Insights through the lifecycle of transcript creation and sound practices for compliance professionals to follow.

The Emergence of Expert Transcript Libraries

As the state of investment research evolved, compliance risks generally increased while the complexity of compliance tasks intensified. Fortunately, in a few instances, technological advancements have also resulted in the development of research services and products that mitigate compliance risk, improve efficiency, and reduce time-on-tasks for compliance professionals. One example is the development of compliance-reviewed transcripts for one-on-one consultations between industry experts and investment analysts like that of AlphaSense’s expert transcript library.

Similar to live one-on-one consultations, transcript-based research products have the potential to provide high-quality and informative content for investment analysts. Expert transcripts have permitted investment analysts to consume this research asynchronously and within a time frame that accommodates the investment analyst’s needs.

When combined with AlphaSense’s powerful artificial intelligence (AI), Expert Insights is the most comprehensive and efficient primary research method with more robust search capabilities than other forms of primary research.

The exponential growth in demand for expert transcripts alone demonstrates the value they provide. This growth has led to innovation within the consumption model for transcript-based research. In the market today, there are three general types of relationships with a transcript platform:

• A passive subscriber-only
• A subscriber who also provides content by conducting one-on-one calls
• A subscriber who proposes research ideas and interview questions for the transcript platform to perform on the subscriber’s behalf

Fortunately, compliance-reviewed expert transcripts have the capability to provide numerous advantages for compliance professionals. From the perspective of internal compliance staff, a transcript platform that performs one-on-one consultations on behalf of an investment firm or provides a compliance-reviewed, transcript-based product to an investment firm can reduce the compliance risk of primary research. This allows compliance resources to focus on more urgent research activities.

The Lifecycle of Transcript Creation

Understanding the lifecycle of a transcript is an important element in developing compliance policies and procedures for transcript-based products.

As we follow along the lifecycle for a transcript below, we find that investment analysts and consultants who would intentionally disclose confidential information or MNPI are actually disinclined to participate in recorded calls. This means that unreliable participants are easily filtered out by our screening process because we require consent to record and transcribe all consultations.

Initiation of a transcript

The decision to conduct a one-on-one consultation begins with the initial research idea, typically generated by an investment analyst who requests that the transcript platform recruit potential experts for a consultation.

After the initial research idea is generated by investment analysts, our recruitment team identifies industry experts who can make it through the on-boarding process and compliance vetting process. From there, the candidates will then proceed to the completion of consulting agreements and pre-qualification questionnaires.

For those experts that make it through the vetting process, a call will be arranged with a compliance-trained investment analyst who has experience on the proposed subject matter.

Post-Consultation

After the expert interview is conducted and recorded, the recording is then processed by AI into a readable transcript with enhanced attributes such as time-stamps and identification of the participant who is speaking. 

Prior to the technological ability for AI or machine learning to accurately convert spoken language into text, the time commitment and direct cost of transcription was reserved for very limited uses. The ability for web-based systems to convert spoken language into usable text is precisely the intersection of technology and compliance that has enabled the development of compliance-reviewed, transcript-based products.

AlphaSense carefully navigates this intersection with world-class compliance of its expert transcript library and explains that no single transcript is more important than the integrity of the entire library in the Signals podcast.

“We have an automated workflow for this; so, no transcripts can move outside of the pre-designated workflow. The compliance review team is reviewing each recording and transcription. As I mentioned, nothing can make it to the library without affirmative compliance approval. So it’ll just sit in the queue until we approve it or kill it. It can’t move past that.

We make compliance edits to remove information that doesn’t meet our compliance standards. And sometimes we do have to kill a transcript because it just can’t be cured no matter how much compliance editing you do.””

– Signals Podcast | Sean Farrell, Chief Compliance Officer, AlphaSense

Compliance Review

The transcript then moves on to compliance review, wherein compliance reviewers listen to the recording and read through the transcript, flagging any content that violates the platform’s publication standards. 

Compliance takes top priority at AlphaSense to deliver trustworthy alternative data for safety and peace of mind. Our dedicated compliance team carefully reviews each transcript to ensure it aligns with regulatory requirements, minimizing the risk of exposing primary research to MNPI. Any objectionable content will either be removed directly from the transcript or escalated to further review by more experienced compliance professionals. Some topics that our compliance reviewers are trained to accurately identify include:

• Contradictions between the consultant’s representations during the consultant’s onboarding phase and what the consultant represents in the one-on-one consultation
• Discussions of non-public information regarding the consultant’s current employer
• Breaches of confidentiality obligations that the consultant has with other entities
• Revelation of current sources of information at a target company
• The disclosure of information that is both material and non-public

By the end of the transcript creation lifecycle, every facet of the transcript has been accounted for. The industry experts interviewed, the investment analysts conducting the interview, and the transcripts published have all been diligently screened to ensure that all content published in the AlphaSense expert transcript library is compliant.

Sound Practices for Compliance Professionals

Sound practices are based upon the nature of the relationship with the transcript platform. In cases where an investment firm subscribes to the transcript library, but does not provide content to the platform, the compliance procedures will be less intensive than where the investment firm is also a content provider.

When performing initial due diligence on a transcript platform as a potential subscriber, compliance professionals should look for the following attributes:

• Compliance Vetting – A recruitment process for consultants that avoids conflicted consultants, such as those that are prohibited from performing consultations, that work for the target company, that work for a material supplier or customer to the target company, that participate in clinical trials with unpublished results, or those employed by government agencies with access to confidential information.
• Consulting Agreements – The mandatory use of a consulting agreement that includes, among other terms, definitions of what information is considered confidential, material, or non-public, along with representations from the consultant that such information will not be shared on the one-on-one consultation.
• Compliance Questionnaires – The use of a compliance pre-qualification questionnaire similar in scope and depth to those utilized for live one-on-one consultations.
• Proper Documentation – Documented consent by all participants for the one-on-one consultation to be recorded, transcribed, and published.
• Trained Compliance Reviewers – A comprehensive compliance review process with trained compliance reviewers who are tasked with reviews of each transcript before publication. Similar to any role where task saturation is possible, the quantity of compliance reviews should be reasonably correlated to both the reviewer’s experience level and the time necessary to perform a thorough review.
• Continuous Compliance Training – The existence of a thoughtful training program for the compliance reviewers with ongoing professional development for the compliance reviewers. The training program should include materials that provide for both cognitive objectives and performance objectives, such as a combination of classroom learning and the use of training transcripts. The training transcripts should be selected to enable evaluation of progress among trainees and to permit for targeted training support if a particular lesson did not result in adequate progression.
• Usage Reporting – The distribution to clients of periodic usage reports that accurately reflect what transcripts have been accessed by the client’s investment analysts.
• Regular Process Audits – The existence of a forensic testing process to ensure that the compliance processes are operating as intended.
• Compliance Portal – Access to a Compliance Portal, like that of AlphaSense, to audit all transcript activities and compliance questionnaires related to your company or customized expert interview for complete transparency.

If an investment firm chooses to also be a content provider, then additional sound practices for compliance are advisable based upon the nature of the relationship. For example, where the investment firm provides research ideas and interview questions for the transcript platform to execute, compliance professionals for that investment firm should evaluate whether an internal approval process is appropriate.

Further, if an investment firm chooses to be a content provider that allows its analysts to engage in one-on-one consultations within the transcript platform, then compliance professionals should implement the same compliance procedures used for expert network platforms.

Gain Competitive Confidence with Compliant Content

Advancements in technology have resulted in an evolution in the types of fundamental research performed by investment analysts. In many cases, this evolution has resulted in greater compliance risk and larger workloads for compliance professionals. However, the advancements in AI and machine learning that have supported precise transcription of spoken words into written text, have also enabled the development of compliance-reviewed, transcript-based research products.

These products not only improve the efficiency and effectiveness of investment research, but also reduce compliance risk while conserving compliance resources for higher-priority objectives.

Gain competitive confidence with risk-free compliant content. Start your free trial today.