Class action lawsuit against Donnelley Financial Solutions could change everything in RegTech from regulation to governance and scrutiny by investors in financial compliance.

Currently forcing waves in the RegTech and financial compliance arena is none other than that class action suit against Donnelley Financial Solutions (DFIN). The lawsuit states claims of misleading financial disclosures, insider trading, and non-compliance with the SEC regulations and raises great concern regarding effective corporate governance as well as transparency. As in the case of DFIN and with the fact that it works in the regulatory technology space, this case could give industries in this space an entirely new required basis for compliance.

This lawsuit may lead to even tougher regulatory scrutiny and increased expectations of corporate governance in RegTech companies. The U.S. Securities and Exchange Commission (SEC) may establish stricter standards and require those investors to demand greater transparency and internal audits of similar companies. This may lead to a market change in the way institutional investors perceive risk-based evaluation of financial compliance and reporting technology.

As for regulators in general, it will probably extend beyond DFIN. As the big RegTech companies in line for abuse include Workiva, Broadridge Financial Solutions, and SS&C Technologies, the civil action has the potential to open the door to stricter due diligence and reform measures, together with stronger protections in real-time transparency for executives and whistleblowers.

For investors, this case denotes the relevance of transparency and proper due diligence when investing in the RegTech sector. These variables will affect substantially the norms of the industry that could further shape the future of financial compliance technologies.