The Securities Compliance Podcast: Compliance In Context

Patrick Hayes
The Securities Compliance Podcast: Compliance In Context

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.

  1. 11 DE DEZ.

    S5:E10 | What's Happening in Crypto and the Impact of a New Administration | Compliance In Context

    Welcome back to the Compliance In Context podcast! On today’s show, we welcome in Ranah Esmaili and Louis Froelich to help us review the current state of crypto and digital assets, the impact of a new administration, how firms operating in this space should be thinking about custody, and what the SEC Enforcement Division is focused on as it relates to this embattled asset class. In our Headlines section, President-elect Donald Trump has named his choice to run the Securities and Exchange Commission, and finally, we’ll wrap up today’s show with another installment of Outtakes, where we examine what a recent SEC complaint against the chief investment officer of a large investment advisory firm can teach us about the importance of trade allocation and avoiding instances of cherry picking in the delivery of advisory services.   Show Headlines President-elect nominates former SEC Commissioner Paul Atkins to lead SEC   Interview with Ranah Esmaili and Louis Froelich What is the current state of crypto? What is the impact of a new administration on the SEC broadly? What is the impact on crypto, specifically? What baseline SEC rules should registrants still keep in mind? In the digital asset/crypto space, what is the current state of enforcement? What will the SEC continue to investigate (no matter the change in administration)? Do you think cases against platforms for being unregistered BDs will go away? What about custody? What is the current state of the Custody Rule proposal? What are SEC examination teams focused on when conducting examinations in the crypto/digital asset space? Are there any specific cases currently in litigation that you’re paying attention to and why? Using your crystal ball, what do you see changing in the crypto/digital asset space in 2025?   Outtakes The SEC recently sued a former CIO for allegedly orchestrating a “cherry picking scheme” allocating better performing trades to certain favored portfolios, and worse performing trades to other portfolios   Quotes 10:24 – “You know, I think [crypto] is here to stay. I also think that even in a decade from now, people maybe asking the same question. Let’s dive into where we’re at right now. Crypto is everything that you’ve said. It’s a wildly volatile asset class considered its own asset class right now. Most people still don’t really understand what the stuff does. As you know, if their businesses start to invest with it or trade with it, you know, kind of where to begin.” ~ Louis Froelich 11:50 – “The crypto lobby is a very real thing. It was one of the largest spenders in the last campaign. And so when sometimes people look at the headlines of the results or why is crypto such a thing, I don’t think it’s a coincidence, right? I think there’s a lot of people that made a lot of money in the space, had vested interests, have worked very hard and deliberately to kind of have the election results that we have and have crypto, kind of, part of the national conversation.” ~ Louis Froelich 17:42 – “So I expect we’re going to continue to see crypto asset offering fr...

    1h4min

  2. 31 DE OUT.

    S5:E9 | DOL Fiduciary Rule Update – Where Are We Now and Best Practices for Retirement Investors – Lessons From The Front Lines | Compliance In Context

    Welcome back to the Compliance in Context Podcast! On today’s show, we feature a Lessons From The Front Lines episode where we welcome an august panel to provide an in-depth look at the embattled DOL Fiduciary Rule—including where are we now, what’s next, and what other best practices firms should firms have in place currently regarding any investment recommendations being made and other services provided to retirement investors. To help guide us through this important topic and share some fantastic insights for our listeners, we welcome in august panel of experts—Jason Berkowitz with the Insured Retirement Institute, David Kaleda with the Groom Law Group, and Jason Roberts with the Pension Resource Institute.   Show Interview with Jason Berkowitz, David Kaleda, and Jason Roberts Reviewing the current state of the DOL Fiduciary Rule Is there a path where the DOL gets the decision reversed or where PTE 2020-02 gets separated out? With the recent DOL Fiduciary Rule getting stayed, where does that leave ERISA investment fiduciaries? What is the status quo? Understanding the 1975 regulation and PTE 2020-02 What is the impact of the Florida district court ruling? Best practices around providing investment recommendations to retirement investors What are the types of things compliance officers can build into their programs now to ensure compliance to PTE 2020-02? What about disclosures for IRAs to IRAs? What about the annual review? Reviewing Reg BI, NAIC, and the full regulatory framework and the related obligations for market participants What is the current state of enforcement in this area?   Quotes 05:57 – “Let me just start with a quick overview of what the regulatory package is, that was adopted earlier this year. It included four components. The first component is a change in the definition of who is a fiduciary under ERISA. And then the other three changes, or the other three components, rather, were changes to what are called prohibited transaction exemptions, which are essentially the rules that ERISA fiduciaries have to follow in order to receive compensation for their services. And, in effect, essentially the way that, at least for my organization and our members, we look at this final regulatory package as significantly expanding the reach of fiduciary status to reach almost any financial professional who interacts in any way with a retirement saver and create significant new burdens and hassles for those individuals in order to get paid.” – Jason Berkowitz 09:18 – “So at this point we're still waiting to see how this will be resolved. There are really two tracks here. One is just this effective date stay, and the other the next track is the merits of the case, whether the DOL even has the authority to do this in the first place. So the DOL did file a notice of interlocutory appeal, which basically means they're appealing the stay at this point and also all the parties had been working on a decision on the underlying regulation and exemptions that's being put on hold so that the DOL can at least consider what they're going to appeal. At this point, they've just noticed the court that they could appeal. Whether they do or not, I guess, remains to be seen.” – David Kaleda

    1h3min

  3. 3 DE SET.

    S5:E8 | PFAR Takes a Vacation and No More Chevron – Lessons From The Front Lines | Compliance In Context

    Welcome back to the Compliance in Context Podcast! On today’s show, we feature a Lessons From The Front Lines episode where we welcome two very special guests, namely Ms. Alpa Patel and Mr. Igor Rozenblit, to share their fantastic insights and help us unpack the Loper Bright and Corner Post decisions, PFAR getting vacated, and what’s next on the examination and enforcement front. Show Interview with Alpa Patel and Igor Rozenblit Reviewing recent judicial developments What happened in Loper Bright Enters. v. Raimondo What does the end of Chevron mean and what are the key takeaways? How does the decision in Corner Post, Inc. v. Bd. of Governors of the Fed. Resrv. Sys. extend the impact of Loper Bright/end of Chevron and potential future agency rule challenges? Reviewing the Private Fund Adviser Rules being vacated What happened in Nat’l Ass’n of Private Fund Managers v. SEC? How do you see this impacting SEC Examinations and Enforcement? Where are the key areas that you expect to see a continued focus from the Staff? Discussion of recent SEC Enforcement, including the focus on recordkeeping Analyzing the current regulatory environment, the industry’s appetite to challenge the SEC on certain issues, and the impact of the upcoming presidential election   Quotes 12:10 – “The rules expanded over the years, and it was always in reaction to litigation, right? Sothis will just be more. PFAR being dropped, and that was obviously more on a statutory authority side. But when you have a rule that’s struck down for being arbitrary and capricious, which is normally how these rules go, the answer to that is, well, let me give you more reasons. And that is why, you know, our releases ended up just writing more. The more you can draft, the better because you’re trying to counteract the idea that you did not address some random issue that a commenter raised, you know, in their 600-page comment letter. So that’s, that is the give and take and sort of the beauty of the Administrative Procedures Act of, well, okay, you’re telling me I didn’t do enough. I will do more. And that’s exactly where you’re going to end up more here.” – Alpa Patel 23:55 – “I think the vacation of PFAR didn’t really change the examination approach of the commission at the moment. I think, had PFAR stood, there was a pretty good probability that exams would have changed pretty significantly and would have transformed into a group that tests a lot of the PFAR disclosures that were required, but that did not happen. In terms of the areas that PFAR covered, those areas are traditional exam risk areas, and that is why they were in PFAR. It really didn’t work the other way around. So in terms of what exam does now, it’s really a version of what they’ve always been doing, which is identifying potential conflicts of interest, identifying potential technical violations of certain rules, including the books and records rule, which is kind of a hot topic right now, and pursuing thos...

    55min

  4. 14 DE AGO.

    S5:E7 | Reviewing the FinCEN AML Rule Proposal | Compliance in Context

    Welcome back to the Compliance In Context podcast! On today’s show, we perform a comprehensive review a of rule proposal from 2024 with the biggest long-term impact to the RIA community—namely AML rule proposal from FinCEN. In our Headlines section, we review recent decision from the Fifth Circuit court to stay the new DOL Fiduciary Rule that was issued earlier this year. And finally, we’ll wrap up today’s show with another installment of What’s On My Mind, where we take a quick moment to visit the 2024 Paris Olympics and review how some of the greatest athletes in the world can give us a critical insight into being the best versions of ourselves and building our own firm’s best compliance program. Show Headlines New DOL Fiduciary Rule and the amendments to PTE 2020-02 and PTE 84-24 stayed by two district courts in Texas   Interview with Ed Wegener and Laura Goldzung Reviewing the FinCEN Rule Proposal to apply AML/CFT (Countering the Financing of Terrorism) requirements pursuant to the Bank Secrecy Act What does the rule proposal say? What will investment advisers need to do? What kind of training should be performed in this area? What other preparations will advisers need to make? What about dual registrants? Can the AML programs of broker-dealer affiliates be leveraged? What are some key factors that RIAs will need to keep in mind if the proposal is adopted? What kind of expectations should be in place from a compliance perspective? Is there required testing that needs to be performed? What requirements are placed on AML Officers? What kind of ongoing due diligence will be necessary or expected? What is the cost of compliance in this area?  Do you anticipate the regulatory focus and related costs going up or down in the future?   What’s On My Mind What can Olympic athletes teach us about developing the best compliance program possible and not letting immediate perfection becoming an impediment to growth   Quotes 10:26 – “Earlier this year, FinCEN proposed adding investment advisors as designated financial institution for AML and CFT purposes. And then additionally following on that, FinCEN and the SEC issued a joint proposal that would require investment advisors to comply with the customer identification and verification requirements, as well as the requirements to identify and verify identities of certain beneficial owners of legal entity customers. So in a nutshell, the impact will be that once this rule becomes effective and we meet the implementation date, investment advisors are going to have virtually the same requirements that certain other financial institutions have with respect to AML programs, including broker dealers. So many investment advisors who have affiliated broker dealers are well aware of those requirements, but we’re working with all of our investment advisor clients to understand what those expectations and requirements may be and how they can prepare for that.” ~ Ed Wegener 20:54 – “In the proposal, Vincent talked about the training needing to be designed based on the roles of the individuals that are being trained. So you have to distinguish different roles....

    1h1min

  5. 18 DE JUL.

    S5:E6 | The Evolution of Compliance at the NSCP | Compliance in Context

    Welcome back to the Compliance In Context podcast! On today’s show, we look at the evolution of compliance through the lens of the NSCP, analyzing key growth milestones, identifying new resources and building for the future, and reviewing what’s up next for the organization in 2024. In our Headlines section, we review recent decisions from the Supreme Court in the Loper Bright case and the long-term impact federal agencies’ rulemaking interpretations. And finally, we’ll wrap up today’s show with another installment of Outtakes, where a recent SEC Enforcement action provides us significant insight and also raises more questions regarding the SEC’s stance on cybersecurity controls.   Show Headlines Reviewing the Loper Bright case and the long-term impact federal agencies’ rulemaking interpretations   Interview with Lisa Crossley and Melissa Loner Background and history on the founding of the NSCP How did compliance evolve within the NSCP and what disciplines were added? How is the NSCP building for the future of compliance?  Reviewing recent resource and staff additions Discussing expanded member offerings and volunteer opportunities How is the NSCP Planning for the future of compliance? New and exciting developments for the 2024 NSCP National Conference   Outtakes SEC charges global provider of business communications and marketing services for internal control and accounting failures charges relating to cybersecurity incidents and alerts in late 2021.   Quotes 22:58 – “I think the community is what runs deep through NSCP and what makes it so special. I mean, I have wonderful friends that I’ve met through NSCP. I’ve had job opportunities that with the help of members of NSCP, it is a very strong community. There’s so many ways to be involved, whether, you know, whether it’s very micro to being on NSCP’s board. So that’s something that Melissa will talk about in terms of volunteer development. But I can speak from my own experience that I felt that, you know, immediately there was a group of members who just were there to help me along the I introduced me to other people got me involved, like whether it was speaking or being on a committee, just being able to have those connections is so important, similar to having your social connections. So that’s something that I’ve always tried very hard to make sure that we maintain and we would maintain those opportunities in various work for our members ~ Lisa Crossley 30:50 – “You look at how the NSCP has evolved over the last couple of years with adding podcasts, adding more virtual sessions, right? We still hear about COVID and how people had to switch up from that and get more creative. We’re sort of in that realm again. We’ve also talked about that with the compliance officer of the future, right? How many of us back in the day thought that we would need to know so much about cybersecurity or any of that type of technology? We have AI, right? That’s a huge initiative all over. So just looking at how we continue to evolve in the subject matter, because the compliance professional of the past is not going to be the compliance professional of the future, right? And so looking at AI, I know that is also a big initiative of Lisa’s is to see not just how we can offer continued resources and AI to our members, but how do we encompass and integrate AI into the National Society of Compliance Professi...

    53min

  6. 11 DE JUN.

    S5:E5 | Building a Third-Party Due Diligence Program | Compliance in Context

    Welcome back to the Compliance In Context podcast! On today’s show, we review an incredibly important topic for all SEC-registered broker-dealers and investment advisers, namely third-party due diligence of service providers—what situations require it, regulatory considerations, and what are the basic building blocks for establishing a successful due diligence program inside your firm. In our Headlines section, we review the recent SEC rulemaking amending Regulation S-P. And finally, we’ll wrap up today’s show with another installment of History Has Your Back, where an old quote from an ancient stoic might just help you make the best of a bad situation when things in your compliance program don’t go exactly as planned.   Show Headlines   SEC adopts rule amendments to Regulation S-P to enhance protection of customer information   Interview with Kevin Gleason   Reviewing the importance of third-party due diligence in the investment management space What are the basic building blocks of a successful third-party due diligence program? What key elements of service provider agreements should be reviewed? What risk factors should be considered when building your due diligence program? What are some of the common situations requiring third-party due diligence and what regulatory considerations should be examined? How can firms make sure to avoid regulatory enforcement in this area? When designing your firm’s due diligence program, what key considerations can help support proper supervision and ongoing monitoring? Are there other business units outside of compliance that should be involved in the process? Establishing a frequency of review that works with your firm’s compliance program Understanding the value of third-party due diligence and how to navigate challenges in the process Reviewing practical takeaways and lessons learned   History Has Your Back   Examining a famous quote from the Stoic philosopher Epictetus and what it can teach us about dealing with the pressures of compliance   Quotes 17:20 – “Does the level of scrutiny need to be the same for, you know, someone that, you know, provides you maybe some training and content for your employees as it does for someone who, you know, maybe executes trades or who, you know, performs sort of risk analytics, maybe a fact set or someone or, you know, right? You know, I'm not here to say it does or doesn't, but to be able to do all of those people and provide the same sort of level of rigor, I think, is rather would be rather difficult for firms.” – Kevin Gleason   25:43 – “I mean, that is sort of the next step, I think, in the process, which is working on developing a questionnaire. With regards to sub-advisors, at least in my mind, right, they provide a similar service. It may be in regard to different asset types or asset classes. It may be taking different risks but really, they manage assets on behalf of your clients or on behalf of a fund or account. Where, I think, it’s more challenging is, now you have lots of other service providers outside of that same sort of function, in terms of a sub-advisor. You have...

    57min

  7. 15 DE MAI.

    S5:E4 | Analyzing FINRA Remote Supervision | Compliance in Context

    Welcome back to the Compliance In Context podcast! On today’s show, we review one of the most important topics impacting broker-dealers this year, namely the issue of remote supervision and how to address the new Residential Supervisory Location Designation and the Remote Inspections Pilot Program. In our Headlines section, we review the recent Supreme Court decision impacting 10b-5 disclosures and a recent FinCEN report tracking new information and trends surrounding elder financial exploitation. And finally, we’ll wrap up today’s show with another installment of Outtakes, where we look at the recent risk alert from the Division of Examinations focusing on new SEC Marketing Rule violations. Headlines Supreme Court decision impacting 10b-5 disclosures FinCEN Issues Analysis on Elder Financial Exploitation Show Interview with Ben Marzouk and Andrew Mount Reviewing the history of remote work and related compliance monitoring and supervision What does FINRA consider an office? What are the implications of how that’s defined? How FINRA is managing remote work in general? What is Regulatory Notice 24-02? Discussing the impact of FINRA Rule 3110.19 (Residential Supervisory Location) and FINRA Rule 3110.18 (Remote Inspections Pilot Program) What are the practical applications of these new rules? How do you see the issue or remote work evolving throughout the course 2024? Outtakes SEC Risk Alert: Initial Observations Regarding Advisers Act Marketing Rule Compliance Quotes 14:50 – “People soon realized that no one was really going back to the way things used to be five days a week in a set physical office location. To some extent, people were going to continue to work from home for some period of time, even at the pandemic subsided. So with that in mind, FINRA reminded firms that, ‘hey, if you’re going to continue to allow people to operate their home and do brokerage business from their homes, you’re going to need to supervise that location.’ And that supervision would mean inspection on some regular set schedule. It would also mean, and we can get into it later, thinking about your membership agreement.” – Ben Marzouk 20:13 – “If an associated person works two days a week from home and three days from the office, FINRA’s staff has said that that would mean towards being a regularly working at home arrangement, and you’d have to count that residential location and as a person. office. I would say that that’s not to say that just because someone’s one day at home and four days in the office during the week you don’t need to count the one day at home, you need to look at the locations where your associated persons work on a routine and predictable schedule with a firm’s knowledge and some sort of formalized arrangement and, you know, make that determination. by case basis. It’s a really a facts and circumstances analysis. You know, that FINRA, as staff has said recently, at least, that of locations that you use on an ad hoc basis, so I’m thinking locations where you work from the office five days a week, but you stay at home on Friday because you have a contractor coming or your kids are coming.” – Ben Marzouk 28:10 – “The one area where FINRA’s managemen...

    1h4min

  8. 7 DE MAI.

    S5:E3 | Breaking Down The “New” DOL Fiduciary Rule – Lessons From The Front Lines | Compliance In Context

    Welcome back to the Compliance In Context podcast! On today’s show, we feature a Lessons From The Front Lines episode with renowned retirement plan fiduciary expert, Mr. Fred Reish, to help us through another groundbreaking DOL Fiduciary Rule and unpacking where and how it will affect investment adviser and broker-dealer firms across the country. This is an episode you won’t want to miss!   Show Interview with Fred Reish Reviewing the evolving standards of care (Reg BI, RIA, DOL, NAIC) How have disclosures evolved to comply with the differentiated standards of care? What does the new DOL Fiduciary Rule say and what’s changing? Who is going to be impacted by the changes to this new rule? What are the impartial conduct standards? Are there disclosures and other exemptions out there to help mitigate the conflicts noted in the new rule and how can firms comply with them? What triggers an investment recommendation under the new rule? Is there a wholesaler exception? What is the compliance date for the new rule? What kinds of information does an individual need to review in order to effectively perform a comparative analysis between for an IRA recommendation?   Quotes 7:54 – “If you look at both of those, I think Reg BI for broker dealers is actually a tougher standard. I know that’s going to surprise some investment advisers to hear, that but, and part of that’s because the interpretation for investment advisors is really principles, truly principles-based. And, you know, the SEC said the duty of care and the duty of loyalty for investment advisors together is a best-interest standard of care, but very principles-based. If you get into Reg BI, the standard of care is principles-based, but then there are a bunch of rules-based parts to Reg BI, so for no other reason other than just the volume of rules alone under Reg BI make it a more complicated and more demanding set of requirements.” – Fred Reish 21:32 – “Number one, the advisor has to satisfy the impartial conduct standards. Well, what are impartial conduct standards? That's a label from the Department of Labor. It has meaning, though. You have to act with a duty of care, sort of thing of a fiduciary duty, and a duty of loyalty. Similarly, a fiduciary duty. You can't put your interest ahead of the investors. No more than reasonable compensation relative to the services provided, no materially misleading statements. There is a group of things like that that are called the impartial conduct standards.” – Fred Reish

    53min
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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.

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