The faster the current fund administration space becomes connected, the more vulnerable it becomes. Fund managers face escalating difficulties in managing large amounts of data and ensuring it moves securely between systems. 

Fragmented structures and poor integrations are inefficiencies and vulnerabilities that can cost an organization penalties and investor trust. Secure data connectivity is thus critical for safeguarding investor data, staying compliant, and allowing timely decisions. 

In this article, we uncover the trends driving data connectivity compliance and how to stay competitive.

What Is Secure Data Connectivity?

Secure data connectivity is defined as protected data exchange and integration between systems, environments, and platforms. It ensures data availability, confidentiality, and financial integrity at all stages of its lifecycle. For the current digital architecture, secure data connectivity entails integration of internal systems with third-party applications, cloud environments, or external partners by using secure systems such as:

  • ・Cloud integrations: For example, linking fund management systems with cloud-based reporting tools
  • ・API: Allowing real-time data transmission between investor portals and portfolio management systems
  • ・Data pipelines: Handling structured data exchange from various sources into a unified data warehouse or business intelligence systems

Whereas these linkages boost efficiency and decision-making, they also expose firms to considerable risks. No doubt, the global average cost of data breaches has decreased by 9% in 2025 to $4.4M. Strikingly, 82% of these breaches involved cloud-stored data. Some of the common exposures include:

  • ・Unauthorized access from credential mishandling or poor access controls
  • ・Data leakage often stems from unprotected endpoints or wrongly configured cloud services
  • ・Poor encryption that exposes sensitive investor or financial data in transit

Regulatory Landscape Shaping Data Connectivity

As firms scale their data processes across services, jurisdictions, and platforms, the regulatory spaces get stricter and more complex. Global privacy laws redefine how firms approach data connectivity, with stringent demands on how it is accessed, transmitted, and protected.

Some of the standard global and regional data privacy regulations include:

  • ・GDPR (EU): Requires organizations to ensure personal data is shared securely across jurisdictions and systems. Otherwise, a violation can cost the organization up to €20 million or 4% of the annual global turnover, whichever is higher.
  • ・CCPA/CPRA (California): Grants California consumers extra control over their personal data, and they can withdraw their data-sharing rights. FIs must enforce secure data exchange processes and fulfil access and deletion appeals.
  • ・PDPA (Singapore): The act requires organizations to execute appropriate security measures for data at rest and in transit. Previously, a breach could cost organisations penalties of up to S$1 million. However, it was revised to 10% of the annual organization’s turnover for those with more than S$10 million local turnover, whichever is higher.

Other sector-specific laws include:

  • ・HIPAA: Demands encrypted data exchange for protected health information.
  • ・FINRA: Requires stringent control over customer data retrieval and storage

Central to these data privacy regulations is the standard of data minimization, purpose limitations, and security. From a data connectivity viewpoint, organizations must:

  • ・Execute secure data exchange protocols such as encrypted APIs, HTTPS, or SFTP
  • ・Log and audit every data transmission across systems
  • ・Safeguard against illegal access and ensure data moves only when authorization is given
  • ・Ensure third-party integrations follow privacy laws

Consequences of non-compliance

Non-compliance with the set data laws can amount to:

  • ・Huge financial penalties: For example, in 2023, Meta was fined a record of €1.2 billion for violating GDPR laws in the cross-border transfer of users’ data.
  • ・Reputational damage: Affects user trust and collaborations. In fact, in a McKinsey survey, 87% of respondents revealed that they wouldn’t do business with a company whose security processes they couldn’t trust.
  • ・Operational disturbances: Regulators can limit data processing activities, disrupt external collaborations, or internal processes.

Common Compliance Pitfalls in Data Connectivity

Even with transparent data privacy regulations for integrated platforms and current infrastructure, several companies still fall short of secure data connectivity. Here are the leading mistakes that can expose companies to data security and compliance vulnerabilities.

1. Shadow IT and uncontrolled data flow

Staff frequently use unauthorized apps, tools, or cloud services, fashioning invisible data flows beyond IT’s control. Shockingly, Gartner reveals that shadow IT accounts for 30-40% of IT spending in large organizations. This fragments data visibility and bypasses the company’s security protocols, creating room for private data to be mishandled or to leak.

2. Weak third-party or vendor oversight

Companies progressively rely on third-party systems to process and integrate data. However, failure to examine or track vendor risk management for data privacy can lead to shared liability and breaches.

3. Lack of end-to-end encryption

Encrypting only data at rest doesn’t amount to total protection. Some companies neglect encryption during data transmission, particularly between APIs, internal processes, or microservices. Unencrypted pipelines can easily be hijacked, exposing critical data mid-transfer.

4. Siloed systems and poor audit trails

When data frameworks are disjointed and logging is inconsistent, it becomes challenging to monitor data flow or prove compliance. Regulatory structures frequently demand full auditability, which helps boost transparency and offers legal protections in case of compliance disputes or violations.

Best Practices for Secure, Compliant Data Connectivity

To promote data connectivity, businesses should consider implementing these six secure data connectivity best practices:

1. Data mapping and periodic risk assessments

Create an exhaustive data flow inventory, update it periodically, and approximate the risk of each touchpoint. It helps you detect weak points before they spiral out of your control.

2. Encrypt data in transit and at rest

Use strong encryption techniques to protect data stored and while in transit between systems. When an endpoint is compromised, this encryption will severely limit the risk of exposure.

3. Implement zero-trust access controls with permissions based on roles

Instead of providing all-access, implement stringent identity verification on all connections. Limit authorization based on user roles and regularly evaluate who has access. This lowers unnecessary exposure and helps implement least-privileged access.

4. Standardize vendor due diligence and compliance agreements

Each third party handling your data should be evaluated for security profile and compliance readiness. Agreements should have explicit SLAs, including access controls, breach notifications, data protection, and audit rights.

5. Automate monitoring of compliance and reporting

Include automated tools to routinely monitor data movement, anomalies, and access logs. Auto-generate alerts and automate audit-ready reports to minimize possible compliance gaps, especially by internal or external audits.

6. Build privacy by design into data connectivity

Engage security and privacy professionals before your system goes live. Ensure you incorporate the privacy factors into the plan, utilizing methods such as secure deletion policies, data anonymization, and limited data retention. 

Leveraging Technology for Streamlined Compliance

Modern fund managers utilize tech to fortify and simplify their compliance endeavors. Regtech solutions and automation tools help firms adapt to the shifting demands without overburdening internal teams. Here are some compliance technologies fund managers can adopt to gain operational efficiency.

  • ・RegTech and compliance automation: Tools such as intelligence checklists, AI compliance trackers, and policy engines help automate recurring regulatory tasks and lower human error. Platforms such as RAISE integrate the tools with fund workflows, shrinking the overheads for manual compliance tasks and optimizing operational efficiency.
  • ・Embedded privacy with Linnovate: Unlike remodified solutions, Linnovate’s digital fund service architecture links security and privacy into the fund lifecycle, ensuring compliance is a central element, not an afterthought.
  • ・Data loss prevention (DLP)  and secure API compliance and security: Safeguard sensitive data in transit and during integration with third-party systems.
  • ・Real-time alert and monitoring systems: Real-time alerting of suspected activities or compliance breaches enables quick reaction, reducing risk and restoring investors’ and regulators’ confidence.

Turning Data Connectivity into a Strategic Advantage

Data connectivity should support growth and not be a liability. With the changing regulatory environment, it is crucial to ensure secure data connectivity and privacy compliance to safeguard investor data, gain trust, and expand sustainably.


Linnovate’s privacy-first solutions offer exactly that. It’s a secure, data connectivity compliance infrastructure developed for modern fund managers. Check here how we help you stimulate growth with a compliant cloud data architecture.