The Fund Ontology is an operational application of the Financial Regulation Ontology (FRO).
Semantic Compliance® is an ontological approach to regulatory reporting and oversight. The Fund Regulation Ontology 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:
Must firm xyz register as an investment adviser with the Securities & Exchange Commission?
- 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.
- Facts (FIBO)
The relevant facts about the firm, services, managed companies, clients, assets under management are asserted in the ontology.
The semantic Reasoner or inference engine subsumes firms to be a member of the defined classes based on the asserted facts.
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.