When a regulatory enforcement matter emerges, the first three days often shape everything that follows. Yet most firms spend that window scrambling to piece together the basics rather than setting a confident course.
According to Sherlocq, the trigger is rarely dramatic. It might be a phone call, an internal alert or a whistleblower complaint that arrives late on a Friday.
What follows is a period of improvisation. Even firms that have invested heavily in compliance programmes find themselves gathering fragments of data from disconnected systems, manually reviewing rules that have not been studied closely in months, and drafting sensitive correspondence to regulators without the clarity the situation demands.
The stakes in those early hours are disproportionately high. The tone set with the regulator, the boundaries of the internal investigation and the choices around disclosure are frequently decided at this stage. Each of these depends on how much the firm genuinely understands about its position, and how fast it can reach that understanding.
The core problem is not a shortage of information but the difficulty of finding it. Compliance, legal, operations and front-office teams each hold part of the picture.
Relevant rules and guidance sit across multiple sources, while past enforcement cases showing how regulators have handled similar facts remain buried in public records that nobody has time to compile under pressure.
The consequences are predictable. Document collection becomes excessively broad as a defensive reflex. Early communications grow cautious and vague, which can later appear evasive. Investigations end up scoped around whatever data is easiest to access rather than what matters most. Taken together, these signals suggest to a regulator that the firm has not yet grasped its own situation.
Firms that handle these moments well tend to be those able to establish facts and regulatory exposure quickly. That depends less on headcount and more on answering three questions at speed.
First, which rules, guidance and precedents does the issue engage across the relevant jurisdictions? RegTech platforms such as Sherlocq are designed for this type of on-demand research, returning sourced and traceable answers in minutes rather than days. Second, what does the firm’s own documentation reveal when benchmarked against the applicable standard? Third, what investigative scope can the firm credibly defend?
The benefits build on one another. Mapping an issue to specific rules within hours enables measured, credible communication. Scoping investigations on real evidence reduces later surprises. Prompt, visible remediation is often viewed by regulators as a meaningful mitigating factor, and firms demonstrating early control are more likely to reach negotiated settlements than face prolonged contested action.
Crucially, this capability cannot be built in the moment. It must exist before the call comes, not as constant surveillance, but as the ability to research the regulatory landscape quickly and precisely. Most regulated firms will eventually face such a moment, and how they respond is increasingly a decision made well in advance.
Nikos Patsiogiannis, Member of the Board of Advisors, Sherlocq, said, “When a regulator calls, the question is rarely whether the firm has the information. It is whether the firm can find it in time. In the first 72 hours, speed of retrieval is what separates a controlled, credible response from a defensive one, and that capability cannot be assembled in the moment. It has to be built before it is needed.”
Bhavin Shah Founder and CEO, Sherlocq, added, “In an enforcement matter, the first three days set everything that follows. The firms that come through well are not the ones with the biggest legal teams – they are the ones that could see their own regulatory position clearly, fast.”
Read the full Sherlocq post here.
By Daniel Willis, Editor of RegTech Analyst
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
