-Welcome to another episode of "FINRA Unscripted."
My name is Eric Szaal, and we're here in Washington, DC,
a rather appropriate location because I'm joined today
by FINRA's head of government affairs, Greg Dean.
Greg, welcome.
-Eric, thank you very much.
-Glad to have you here today.
-Glad to be here.
-First of all, I want to take us back in time a little bit
because, Greg,
this is not your first go-round here with our organization.
You were here with our predecessor organization NASD,
so I want to give our listeners
a little bit of your personal history with the organization.
Could you tell us a little bit about your previous time here?
-Oh, sure, absolutely.
You're absolutely correct because before I joined FINRA,
I was with NASD regulation back in 2000, 2001.
I was in the Office of General Counsel at that time.
I was working on membership regulation
and other type of investor protection regulations.
So it was a fun time to be here.
We were just past the Y2K, and there was a lot of excitement.
-What attracted you to the government affairs world
after you moved on from then NASD?
Well, after NASD, I jumped right after 9/11 up into the Hill.
So I spent nearly 14 years working Capitol Hill
on the House side
for a little bit, mainly on the Senate side.
Worked for about six different committees,
and I really had a good, fulsome experience on the Hill side.
Prior to that, I worked in the executive branch,
working with small companies
and the Small Business Administration.
and so I thought I'd come back.
Robert Cook had asked me.
The position at the head of government affairs was vacant,
and he called me up and said,
"Would you be interested coming on over and back to FINRA,
back to your old roots?"
And there was a lot of excitement at FINRA
at that time.
We were celebrating our 10th anniversary last year.
There was a lot of work to do.
We were about 10 years post the economic downturn.
And so the regulator, the broker-dealer industry,
it was just a great opportunity to come back
and get to work with everybody.
It was good to come back and see a lot of familiar faces here,
but it was also good to see that the organization
has truly evolved over time.
-Back to the old stomping grounds, if you like.
Well, let's step out of the DeLorean, Greg,
and back to the present day and talk about your duty,
your current duties here with FINRA.
And obviously with government affairs,
there are working on a number of fronts with respect
to advancing FINRA's cause related to investor
protection and market integrity.
So why don't we start with talking about what your team,
at a high level, is doing at the federal level.
-Absolutely. There's a lot going on.
We have the change in the administration
at the beginning of last year with the new president
and new administration coming in.
We had a lot of new members of Congress,
both on the House side and in the Senate.
We had changeover on some of our oversight
subcommittees and full committees.
And in addition, there's a lot that we had interaction
with our state regulators, as well.
Office of Government Affairs
not only interacts on the federal level,
but on the state.
So it was a good opportunity for us to come in,
re-establish our ties with our friends
and colleagues both on the state level and the federal level,
as well as being able to tell them
the story of what FINRA does.
What we do for investor protection,
and what we do for market integrity.
How we use technology, how we work
collaboratively with other regulators.
And really to tell the story of what we do
because I think that we have a great story to tell,
but it's a little bit hidden.
And so it's good to bring this out in the open
and also working with the regulators.
-What activities -- you mention state regulators.
What activities does the Office of Government Affairs
do at the state level?
-Well, we work with NASAA,
which is the North American Securities
Administrators Association.
And all of their members --
there's 50-plus jurisdictions within the US,
plus they have Canada and Mexico.
But there's a lot that we do with them particularly.
We hold over 80 calls, quarterly calls, throughout the year
with each of the individual states and regional.
Plus, we talk about how we can interact,
promote investor protection.
There's a lot of work that we've been doing on senior investors.
In addition, just talking about
what they're doing on the state level.
Recently, they issued a couple reports
on initial coin offerings,
and we're also working in that particular space rather well.
-Now, of course, FINRA is not the sole regulator
there in the financial space.
What does Government Affairs do with respect
to promoting relationships with other regulators,
or fostering relationships?
-Well, as you clearly point out,
there's a number of regulators, both on the state side,
but primarily on the federal side,
we have a lot of financial federal regulators.
We have our primary regulator,
which is the Securities and Exchange Commission,
but we also do a lot of work with the Department of Treasury,
the Federal Reserve Bank,
the Federal Reserve Bank of New York,
the Office of the Comptroller of the Currency,
the CFTC, the Commodities Future Trading Commission.
So there's a lot of interaction there and a lot to work on.
All of the agencies have investor protection
as one of their top.
But I think FINRA actually works collaboratively
in making sure that we can reach out,
providing the broker check system,
providing investor education foundation,
which is one of the largest investor
education foundations in the country.
And being able to promote that and unify it
with the other regulators.
-Before we move on, another thing that Government Affairs
is involved with that a lot of our listeners
may not be aware of
is that you're involved with our Office of Investor Education,
presenting what are called investor forums
around the country.
Could you tell our listeners a little bit
about what your office does with those events?
-Absolutely. These are great events
because they're more getting outside of the Washington, DC,
and holding these outside, where the real investors are.
It's making sure that we're getting the message out,
targeting so that they understand,
how do you invest, what you should be looking for,
what questions you should be asking,
what is an investor professional that you should be looking with.
We usually partner these with the state security regulators.
We hold them in various cities, both large and small,
throughout the country.
In addition, we work with members of Congress.
We ask them as special guests to come and talk
about what they're doing in Congress.
We had a very good investor forum recently
that spent a lot of their time on seniors issues
because Congress is working on the Senior Safe Act,
and FINRA is just releasing a rule
that is for the protection of seniors.
So it was a very good synergy there.
And we also had the state security regulators
talking about this, as well.
-The Senior Safe Act that you just mentioned.
For those not familiar with it, what is that, exactly?
-Well, the Senior Safe Act is Congress' answer to allow,
whether it be broker-dealers, whether it be community banks,
whether it be investment advisors,
that if they suspect there's an activity of fraud
or perhaps something unusual going on with a senior investor,
that they could pass that information on
to their regulator.
Which is very important because we can then step in,
if necessary, take a look at the situation,
find out if the investor, the senior investor,
is making the right decisions,
or are they not making the right decisions, being influenced
by somebody else to make improper decisions
or decisions against their interest.
So, Congress is looking at this
to provide a little communication,
safe harbor for people within the industry
to work with the regulators to help protect seniors.
-Always something important to do.
Why, Greg, does a regulator like FINRA need
or have need an Office of Government Relations?
-Well, it's going back to the number of federal agencies
and state regulators that are out there.
There's a lot of them.
When you're talking with the state regulators,
there's 50-plus jurisdictions out there.
We mentioned that we have at least five or six,
seven federal regulators.
It's good for FINRA to have a one-touch point
within the one touch point within the organization.
That way, we can respond quickly if we have another regulator
that's contacting us to get that information out.
Also, it provides us with an ability to educate people
as to what we do.
For example, when we started last year,
we quickly realized that we have
one of the best technology companies in the world
that people don't know about.
When we do our cross-market surveillance,
we're actually handling between 35 billion
to 50 billion transactions a day.
And people had no idea.
So, when we talk to members of Congress,
talk to other federal agencies,
and we're bringing that to their attention,
it really is a mind-opening experience.
For example, we recently were able to give members
of our oversight committee
on the House Financial Services Committee
a live demonstration of our OATS program.
There they could see all the orders,
they could see all the customers being placed,
how they're going through the system
as part of that 35 billion transactions
that happen each day.
So, it was truly an amazing event.
And to have members of Congress see that firsthand
and ask questions,
it really was a very good learning experience for them
and a very good opportunity for us
just to promote the great things
that we're doing technology for market integrity.
-Do you have members of Congress, staff members,
or in-state regulators,
as well, say, "Wow, I didn't know that,"
when you come out of one of these sessions?
-Oh, absolutely. That happens quite a lot.
I don't want to say too much,
but it does happen from time to time.
I mean, when we were doing this OATS demonstration,
and you can click down to each individual order,
and then you can see which different
trading venues it goes through
before it's finally executed,
and their eyes just pop open as,
"Wow, I didn't realize you had that much detail,
and you were able to do that."
But it's also then giving the education on top of that
and saying, yes, not only can we follow that,
but we can also use artificial intelligence and tools
to find when there's abnormalities,
or we may detect fraudulent trading,
and we can go back and reconstruct this.
So it's just very -- it's a good opportunity,
and you really can see their increase
in understanding of us is very good.
-Greg, did you ever think you'd find yourself
talking about artificial intelligence?
-I have not, no.
Usually my family accuses me of it all the time,
but, no.
-How would you say that the Office of Government Affairs,
the work that you do -- your team does --
how would you say that that advances FINRA's mission?
-Well, it goes back to interaction.
It's the interaction with Congress.
It's the interaction with the regulators themselves,
making sure that we have good, strong dialogue between them,
as well as an education component.
We're more of a resource more than anything else.
When members of Congress have a constituent that has a concern,
we say, "Okay, we have the senior help line,"
that they can contact.
Or we ourselves will help work with constituents to find out
if they're having concerns, or if they have questions.
If they want to find out what's the difference
between a mutual fund and a variable annuity,
we can help point them in the right direction.
-It's very important, indeed.
You've talked about some of the issues already
that are kind of hot button issues
that you're talking about.
Could you give us a little more insight as to some of the issues
that your team is discussing,
first of all, at the federal level?
-Well, I think the important issues that are coming out now
are more technology related.
It's cyber security issues.
It's making sure that firms of all size,
from small firms to large firms,
have the capability of understanding
of what's happening with that.
It's also developing the new tools.
Whether it be robo-advice tools
or artificial intelligence tools,
how we can harness that technology
for the betterment of investors overall.
And also to help track down and root out fraud.
So, I think there's a very important lesson for all of us.
And I think our role is just to help
with those issues and promote them.
But right now, we're also at a very unique part of time
where ten years past, the economic downturn of 2008.
And so we're in a different environment,
so there are different challenges
with that particular environment.
Different investor education issues coming up.
These crypto currency and ICO issues are brand new.
So there is also a learning, not only for us,
but for the regulators, but also for the investors themselves.
-You mentioned the 10-year anniversary
of the economic downturn.
Do you find you're still talking about lessons learned
from those events today?
-Absolutely. You look at --
Because it was such a monumental event --
economic event in our country,
the markets on the verge of collapse and how we came back.
A lot at that time dealt with not only the housing market,
but our also understanding
within the financial markets themselves --
operating, how they're underpinning.
And so you've seen a lot of change with that,
but we're still learning a lot of lessons as we move forward.
In addition, you think about 10 years ago.
We were talking last year,
it's the 10-year anniversary of the iPhone.
How we interact with investors is changing as we sit here.
The rise of the smartphone, the tablets.
Artificial intelligence didn't exist ten years ago.
Yet, many Millennials and young investors,
that's the only way they get their information.
Are we reaching them?
Are we really providing the necessary information
to make sure they're up to date,
up to speed, and educated on financial markets?
-Do you find that you and your team are talking
about those similar issues
with state legislatures and regulators?
-Absolutely.
It's an ongoing dialogue with them.
I think trying to reach different segments
of the investor population has always been --
I mean, we talk about seniors all the time.
But there's also looking at Millennials
and how to dialogue with them in a different way
than you would a senior investor.
-Obviously, Greg, it's 2018.
We're in an election year.
Are there certain challenges that you and your team address
in an election year?
-Well, in an election year, as I said,
we try to operate as a resource for our members,
and we also try to educate.
That's our primary role, so an election in and of itself
is not really affecting our primary work
in interacting with regulators and interacting with Congress.
But we definitely don't get involved in the politics,
and we don't get involved in elections.
And we don't have a PAC.
So there is many things that we just try and stay away from
and try to keep to our core missions.
-I think that's always very important.
Obviously, there was a change in administration about a year ago
at this time.
Similar question.
What challenges are you and your team addressing with that change
in administration
as it continues to unfold?
-Well, there's a lot of change that has happened.
Many people say, "Oh, the change in the administration."
Yes, but there's also change in personnel, both at the top --
A lot of new cabinet agencies.
We have a new SEC chair.
We have recently two confirmed SEC commissioners
that have just joined the agency.
In addition, most of the top brass of all the agencies
have changed over.
In addition with that, you have a lot of executive orders
that came out early within the administration,
which did put a lot of focus on the financial markets
and looking at them.
One particular executive order came out in February
was having the Department of Treasury
take a look at the financial markets.
And Department of Treasury decided that rather
than doing one report,
they're going to do four separate reports.
So it's very important for us to understand,
if they're going to be looking at capital markets,
if they're looking at fin tech, if they're looking at reg tech,
what roles do FINRA play in those particular markets,
and how can we be a resource or helpful?
But yes, there's been a lot of activity with the agencies,
and I think they're just starting to get
their feet under themselves,
so they're going to get real active
probably in the next few months.
-You mentioned several times now technology, crypto currency.
These things that didn't exist 10 years ago.
You're not a technology.
I'm not, either.
How much preparation, how much reading do you
have to do on these topics
in order to talk about them in an informed way
towards members of Congress, state, federal regulators?
-That's absolutely a great question.
Office of Government Affairs is not the technology gurus
or gurus of a lot of the information here.
What's really important is we work
with all of the different units across FINRA.
For example, when we did the OATS demonstration,
it wasn't the Office of Government Affairs.
It was all of our great officials over
in market regulation that did that.
When we're talking about fin tech or reg tech, it's not us.
It's emerging regulatory initiatives that are coming out.
They're talking about those issues.
So we do a lot of reading,
but we also pull in all of our great folk
from across the organization
and make sure that we're getting them before the right people.
We're gonna bring them to the Department of Treasury
to talk about the capital markets or fin tech or reg tech.
We're gonna bring them into Capitol Hill
to do the OATS demonstration among other things.
-To that point, how much of your time
is spent relationship building within FINRA?
You know, meeting with people,
getting the background on issues?
-Oh, a tremendous amount of time.
I think that has been one of our key hallmarks
is trying to reach out
and making sure we build those contacts,
making sure that our policymakers
within the organization
really understand what's going on.
So we develop mailing lists internally,
so as soon as we have events
or news that's happening up on the Hill or in the agency,
we can send it out to people.
In addition, when we get calls from the Hill saying,
"I really don't understand
what happens with this trading order,"
we can bring the experts in from Office of General Counsel
and Market Regulation up to them and really explain it in detail.
-Well, Greg, we're gonna round third base here
and start closing things out
with a few more getting-to-know-Greg questions.
-Okay. -First of all,
what do you most enjoy about what you do?
-I think it's the relationship building.
I think it really is knowing, at the end of the day,
we are building relationships.
Our core mission is investor protection and market integrity.
And it really is highlighting that
and making sure that we can --
what we learn, we can share with other people,
as well as if there's things that we can do better.
I wish to share that with everybody else.
But it really is getting to know the people
and the interaction there
that has proven to be a lot of fun.
-I would imagine over the years, Greg,
you've had some interesting interactions
and some amusing stories.
Any that you want to share with us today?
-I think one of the ones that just happened recently is,
part of our Hill visits --
we'd take Robert up to meet with our oversight committees.
And on a recent meeting, we had a schedule
with Senator Mark Warner from Virginia,
who is the ranking member of our oversight subcommittee
on the Senate Banking Committee.
And we were going in to meet with him,
and Senator Warner has worked with FINRA over the years.
But as soon as we walked in the door, Senator Warner said,
"It's nice to see you, Robert, however,
Minority Leader Chuck Schumer
just called me for a meeting at the Capitol,
and I've gotta run, so come with me."
So, off we were dashing down the hall, down the elevators,
and we even took a ride on the Senate subway
that the members use to go from the Senate office buildings
over to the Senate floor.
And it literally turned into the elevator pitch.
So, we had about five minutes with Senator Warner,
but Robert did an excellent job
of just trying to get everything done.
But in that atmosphere, we're in the elevator,
we're in the subway, we're in the elevator again.
It was just a lot of fun to see that,
and anything can happen at a moment's notice.
-You mentioned subways, so you're going to Capitol Hill.
Do you get there by metro, taxi, or ride share?
-Okay.
I usually use the metro if I'm gonna go to the Senate
because it's my old stomping grounds.
It's easy to get off at Union Station.
The House is a little bit more difficult to get to.
So, I'll probably use ride share or taxi.
Especially some of the House office buildings
are a little far off campus up there.
But I try to use metro as much as possible.
-I imagine someone in your position
watches a fair amount of CSPAN.
Do you do it for work, pleasure, or both?
-Oh.
Yeah, I do watch CSPAN.
[ Laughs ] Yeah, it happens.
I still follow when there's bills moving on the floor.
Last year, there was talk about the reconciliation,
which is quite an obscure Senate and House term.
But I used to work on "the reconciliation"
and budget bills.
And so I followed as the amendments were moving on,
so, yeah, you got me there.
-Finally, you wake up in the morning,
you want to know what's happened while you were asleep.
Do you turn on your television, turn on the radio,
or check your smartphone?
-I do two things.
One, as soon as I get up, I check the smartphone
to make sure there's nothing blowing up.
Make a big pot of coffee, and then sit down at my computer
and just read all the newspapers online.
So, just trying to get ahead of the curve
before I head into the office.
But it's also fun.
-Very important to stay informed, indeed.
-And caffeinated.
-And caffeinated, absolutely.
Well, Greg, thank you so much
for spending some time with us here today.
-Thank you, Eric, for having me here.
-That closes out another episode of "FINRA Unscripted."
From Washington, DC, I'm Eric Szaal.
Thanks for listening.
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