Meet Patrick Hayes, investment management counsel at Calfee, Halter & Griswold and your host for The Securities Compliance Podcast presented by the National Society of Compliance Professionals. A personal master class for the securities legal and compliance professional, Patrick’s passion is to help you put Compliance In Context™ by combining the technical expertise of industry thought leaders and innovators with the practical experience of doers and key decision-makers. Listen today to help elevate your firm’s compliance program and take your career to new heights.
S1:12 | Lessons From The Front Lines - Examinations and Enforcement | Compliance In Context
Welcome back to The Securities Compliance Podcast! On today’s show, we continue our Lessons From the Front Lines series. Much like our regular shows, this series will provide same excellent content to help you put Compliance In Context™, but will deliver that content in a more narrative form—like a fireside conversation with an industry pro. In this way, the Lessons From the Front Lines series will provide you with practical advice and takeaways that focus on a real-life, tough lessons other compliance professionals and regulators have learned on the front lines of our industry.
To help guide us through today’s show, we welcome in Ed Wegener, the former Senior VP and Midwest Regional Director of FINRA to discuss some real lessons learned on the front lines of the investigation and enforcement process.
Reviewing the life cycle of a regulatory investigation
Analysis of findings from routine examinations, cause examinations or enforcement investigations.
Use of data analytics in the investigation process
Conclusion of the Investigation
Referral to enforcement and escalation of findings
Enhanced focus on the impact the supervisory process and requisite due diligence of products, OBAs, private transactions, borrowing from customers, etc.
Discussion of policies and procedures and related training protocols
How does the firm monitor for compliance with its policy?
Reviewing the FINRA 2021 Annual Regulatory and Exam Priorities
Industry innovations to enhance the process of investigations and enforcement
“When they do conduct an examination, they have been getting really good at taking that information that they gather through things like electronic blotters—putting that through their analytical systems and using that to identify areas of potential focus. And so the way we used to think about it was, it’s trying to find needles in haystacks and the analytics aren’t necessarily going to find the needles for you, but they're going to tell you that if there are needles they're probably in this part of the haystack.”
“I think as an examiner at FINRA, what I really want to know is not particularly what I find on the examination, but when I leave the firm, what are they going to be doing to make sure they have controls over the risks that I’m concerned about.”
“You know it’s interesting I’m not sure that Reg BI is changing the landscape in terms of that from the perspective of really understanding the products that you're selling. I think there's always been that expectation, you know whether it was reasonable basis—suitability requirement or the care obligation with respect to Reg BI but the important thing is that firms before they start recommending products that they understand those products. They understand the features and the risks and that the people who are selling them understand them as well.”
Compliance in Context
S1:E11 | Lessons From The Front Lines - SEC Enforcement and the Impact on the Industry | Compliance In Context
Welcome back to The Securities Compliance Podcast! On today’s show, we officially launch the Lessons From the Front Lines series. Much like our regular shows, this series will provide the same excellent content to help you put Compliance In Context™, but will deliver that content in a more narrative form—like a fireside conversation with an industry pro. In this way, the Lessons From the Front Lines series will provide you with practical advice and takeaways that focus on real-life, tough lessons other compliance professionals and regulators have learned on the front lines of our industry.
To help guide us through today's conversation, we welcome in Rob Kaplan and Bruce Karpati. In sharing their experiences as former Co-Chiefs of the Asset Management Unit, Bruce and Rob discuss the role of SEC Enforcement and its impact on the industry.
What is the role of the Division of Enforcement in the industry, and how does the SEC send a strong message in enforcement cases?
Review the concept of “regulation through enforcement”
Were there consistent failures or compliance violations in the cases you saw in the Asset Management Unit?
Discussion of how negotiations that occur in an enforcement case can result in unintended consequences affecting the industry
Analyzing the lines between clearly violative activity and “minor” violations
Identifying the top one or two lessons learned from each of these cases and the biggest takeaways for compliance
“The good public policy way...is when an enforcement matter comes out and it says you cannot do X, right. You cannot have loans to affiliates that are not properly documented because we don't like that. It's when next time somebody comes to the chief compliance officer and says, hey, we're thinking about making this loan to affiliates that they say you know what “[t]here's this enforcement case that says you can't do that,” or the CEO has been waiting or other compliance professional or the GC has been waiting for a case to come out on point to be able to arm them in discussions with the business side to help set the standards.”
“If you’re sitting on the compliance side and you read one of these summaries of these orders and you’re still confused as to what you actually have to do, that’s a real problem.”
“That to me is the risk: Is that you don’t take something small seriously. You have disclosures that ignore it, it snowballs, and then you have a pattern and practice as it goes on, that you could have really avoided and you don’t know how to get yourself clean.”
Compliance in Context
S1:E10 | Thoughts on CCO Liability from Commissioner Peirce | Compliance In Context
Welcome back to The Securities Compliance Podcast. In today’s special episode, we welcome in SEC Commissioner Hester M. Peirce for an in-depth conversation focusing on the controversial topic of Chief Compliance Officer (CCO) liability. In addition, we discuss the role of outsourced CCOs, the new Marketing Rule, and broker-dealer custody of digital asset securities and cryptocurrencies. She also spoke about the new presidential administration, which will bring in a new SEC Chair and Head of Enforcement, and whether she anticipates a slowdown in dialogue that’s taken place between the regulators and the industry.
Discussing the motivation to help move the conversation on CCO liability forward
Biggest takeaway from the NSCP CCO Liability survey
Concerns over whether personal liability will be imposed in cases of simple negligence
Thoughts on outsourced Chief Compliance Officers
Discussing the impact of a new Administration, SEC Chair, and Head of Enforcement
Thoughts on the new SEC Marketing Rule including key takeaways
Review the SEC request allowing limited purpose BDs to custody “digital asset securities”
Focus areas for Commissioner Peirce in 2021
Career advice for new compliance professionals
“And I think the compliance people at a firm play a really important role in being a bridge and saying to the operational people at the firm, the people who are providing the advice, or doing the day-
S1:E9 | Cybersecurity and Teleworking | Compliance In Context
Welcome back to the Securities Compliance podcast. In today’s episode, we discuss the recently adopted amendments to the Investment Adviser Marketing Rule and a new statement from the SEC alerting investors to a rising number of investment scams.
For our interview segment, we welcome in former NSCP Chair and teleworking compliance expert Craig Watanabe to do a deep dive on how firms can best prepare their compliance programs for the increase in teleworking and the types of supervision, cybersecurity, and data privacy issues that are involved there.
Finally, we’ll wrap up today’s show with another installment of the What’s On My Mind series, where we’ll look at the new DOL prohibited transaction exemption for investment advice fiduciaries and the greatest comedy centered around Punxsutawney, Pennsylvania.
SEC Alerts Investors to Rising Number of Investment Scams
SEC Adopts Amendments to Investment Adviser Marketing Rule
Review the trend toward decentralization and the impact of the pandemic
Compliance challenges that teleworking introduced
Fortress versus endpoint security model and teleworking cybersecurity
Other tips and recommendations for teleworking cybersecurity
Best practices for handling remote supervision
Review of regulatory guidance for remote audits
What’s on My Mind
Groundhog Day, déjà vu, and the new DOL Prohibited Transaction Exemption for Investment Advice Fiduciaries
“And of course, our industry is no exception. We are seeing strong trends toward decentralization, which were evident as you mentioned, prior to the pandemic, but I think just got a huge kick forward with the pandemic and what I think is interesting is most experts believe that this trend will have a residual impact. In other words, when this pandemic is ultimately over, we probably will not go all the way back to baseline, pre-pandemic levels.”
“And so the evolution that we are seeing is, we're seeing cybersecurity evolve from a fortress model to an endpoint security model.”
“...Going over and above and being a great compliance department, I think that was all part and parcel of that idea of being not just a good compliance department, but being a great compliance department.”
Compliance in Context
S1:E8 | Diversity, Equity & Inclusion in Your Compliance Program | Compliance In Context
On this episode of the Securities Compliance podcast, we’re going to discuss Stephanie Avakian’s departure from the SEC, updates on the proposed marketing and advertising rules, very interesting investment advisor metrics, and some new changes coming to New York state IAR rules.
For the interview portion, I chat with Michelle Canella and Hope Brown. The three of us dive into diversity, equity, and inclusion in the financial services industry and discuss the importance of mentors and sponsors.
Listen in for a better understanding about what diversity, equity, and inclusion look like in action in the financial services industry.
Stephanie Avakian steps down from the SEC’s Division of Enforcement.
The SEC punts on discussing the proposed advertising and cash solicitation rules
Reviewing the IAA/NRS Evolution Revolution Report.
Updates to the New York State’s IAR rules
Defining and distinguishing diversity, equity, and inclusion.
Ways to implement these concepts inside your organization.
How compliance professionals can take on issues of diversity and inclusion.
The importance of mentorship and sponsorship in the workplace.
NSCP diversity and inclusion efforts and other 2021 activities
History Has Your Back
Mentors create environments of trust and safety, stimulating development both personally and professionally.
Elevate yourself and your firm by connecting with others to become a mentor or mentee
As a tribute to mentors everywhere, a review of Rudyard Kipling’s poem, If
“Well, first and foremost, I really believe that in order to effectuate change, you should change yourself first.”
““I think that mentors and sponsors are both critical to the success of any professional, and in our particular case, compliance professionals. I think, in particular, for women and for people of color, who typically have fewer interactions with leaders within financial services organizations.”
Compliance in Context
S1:E7 | What's Up with Regulation Best Interest and How the Best Firms are Addressing the New Rule | Compliance In Context
Welcome back to the Compliance In Context podcast! On today’s show, we’ll discuss Jay Clayton’s departure from the SEC and the first real cases from the SEC Enforcement Division's Exchange-Traded Products Initiative.
For our interview segment, we welcome in former NSCP Chair and industry stalwart Miriam Lefkowitz to do a deep dive on how firms can best prepare for the practical application of Regulation Best Interest into their compliance programs.
Finally, we’ll wrap up today’s show with another installment of the What’s On My Mind series, where our focus today will be on the recent rule proposal for “finders” and how this broker-dealer exemption could be just what we need to help struggling businesses with capital formation.
Jay Clayton’s announcement of his departure from the SEC
Major settlement related to improper sales of volatility-linked exchange-traded products.
REG BI and Form CRS preparation.
Practical application of the rule after a full quarter in place
How to avoid trip wires
Comparing good vs. bad disclosures
Methods for staying current with regulations and the NSCP Reg BI Forum
What’s on My Mind
SEC Commissioners Encourage Small Business Advisory Committee to Consider Proposed Registration Exemptions for “Finders.”
“I think disclosures around monitoring are challenging because there are responsibilities and duties that flow from whether your broker or whether you're an investment advisor.”
“The SEC did discuss...the nature and the scope of the review, they've done to date and true to their word. They're looking for good faith efforts to comply. And for the most part they found it.”
Compliance in Context
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