Semantic compliance

The Fund Ontology is an operational application of the Financial Regulation Ontology (FRO).

Fund Regulation defines semantic rules that implement laws and regulations of Dodd-Frank and the Investment Adviser Act. The prototype release determines adviser registration and filing requirements. A firm that meets the definition of an investment adviser must register with the Securities and Exchange Commission, unless its excluded, exempted or prohibited.

  • 15 U.S. Code § 80b–2 (a) 11 Definition of Investment Advisers
  • 15 U.S. Code § 80b–2 (a) 11 Exclusions from definition (A) through (H)
  • 15 U.S. Code § 80b–3 (b) Exemptions from registration (1) through (7)
  • 15 U.S. Code § 80b–3a Prohibition of registration (small and mid-size State regulated advisers)
  • 17 CFR 275.203A-2 Exemption from Prohibition

 

Fund and Financial Regulation Ontology are open source. They align and extend the major domain ontologies for Finance and Legal:


Legal reasoning is the thinking process by which regulators decide actual compliance cases.

The semantic web approach emulates the five pieces of the process:

Legal reasoning Financial Laws, Regulations and Data

Semantic compliance in finance

  1. Issue
    Must firm xyz register as an investment adviser with the Securities & Exchange Commission?
  2. Rules (LKIF)
    The text of the law and regulations is stored in FRO. An ontology module encodes the rules in a hierarchy of defined classes.
  3. Facts (FIBO)
    The relevant facts about the firm, services, managed companies, clients, assets under management are asserted in the ontology.
  4. Analysis
    The semantic Reasoner or inference engine subsumes firms to be a member of the defined classes based on the asserted facts.
  5. Conclusion
    The firms have a new property “regulated as” inferred. For example firm xyz is regulated as required to register (or excluded as a family office, exempted as a commodity trading adviser, prohibited as a small state regulated adviser).

The website is still under construction. You can download the ontology files or browse the documentation. Start with the FRO tutorial. Chapter 3 “Inferring compliance requirements” will be published soon.