Welcome back to the Compliance In Context podcast! on today’s show, we will be tackling one of the most significant topics being discussed so far in all of 2025, namely cryptoassets and the SEC’s Crypto Task Force.  To help guide us through the conversation, we are very pleased to welcome back to the show, SEC Commissioner Hester Peirce. As the head of the task force, Commissioner Peirce shares her unique perspective regarding specific focus areas, collaboration with the industry, and other notable items from the first of 2025. In our Headlines section, FinCEN recently announced that the compliance date for the AML Rule for investment advisers is being delayed by two years, and finally, we close up today with another installment of History Has Your Back, where the story of a famous stockbroker and humanitarian demonstrates the importance of unsung heroes.

Show

Headlines

Interview with SEC Commissioner Hester Peirce

History Has Your Back

Quotes

11:35 - “Well, I’m glad that you highlighted Chairman Atkins’ speech because he has taken a position which has just been really refreshing for me to see, which is that this is work that we can do. It’s work that we should be doing and we’re going to do this work. And really setting the tone for wanting to create a welcoming atmosphere for innovation, but also recognizing that there are areas where our existing regulatory framework touches upon crypto and we have to apply it. Now, we do also have a lot of authority from Congress already to use exemptions as necessary to provide relief from regulatory obligations when that makes sense to do that. And so I think with respect to issuance specifically, we do think that a rulemaking would be helpful.” – Hester Peirce 

19:13 - “I should say that self-custody, that term can mean different things, right? I think someone with crypto assets—does that advisor need to go to a third party custodian or can that advisor hold those crypto assets itself? One reason may be that there isn’t a third party that’s out there that’s able to provide custody. Another reason is that you may feel that you can do it better or you can do it in a way that enables you to manage that that in a way that’s beneficial to your client. And so, again, the goal is that you are taking care of that asset, making sure that nothing happens to it, right? So I don’t think anyone should take on the job of custody lightly. And so I think we do have to be careful as we think about that and not just assume that everything is going to be okay.” – Hester Peirce 

21:52 - “We always need to remember that we can’t—we always need to not forget the lessons of the past, even as we’re thinking about whether this new technology maybe should give people more latitude to do different things. We have to keep in mind the risks that we’re trying to protect people from.” – Hester Peirce

Welcome back to the Compliance In Context podcast! On today’s show, on today’s show, we will be taking a topic known all too well by those in the compliance space, namely maximizing your compliance resources, doing less with more, and getting the most out of what’s available to effectively run your firm’s compliance program to the best of your ability. To help guide us through the conversation, we welcome Louis Dempsey and Bart McDonald from Renaissance Regulatory Services.  In our Headlines section, we review a some recent rule withdrawals and some leadership changes at the SEC , and finally, we close up today with another installment of Outtakes, where a recent enforcement action reminds us of the importance of having proper disclosures for fees and conflicts of interest.

Headlines

Interview with Louis Dempsey and Bart McDonald

Outtakes

Quotes

08:48 – “Really, the risk assessments are incredibly important to help you focus where you want to put your energy and put your time and we'll get into some of that later. From a bigger picture standpoint, you want to leverage your custodians, your custodial relationship. They all have tools that they provide and can help from a compliance perspective, whether those are exception reports, trade reports—and don't forget you also most of them have discounts for other vendors—so whether it's proxy services or really a whole host of items, you want to become familiar with that, you want to stay on top of the reporting capabilities, and...you also have the NSCP. So you really want to look at joining compliance roundtables or other peer networks—that really helps from a practical standpoint.” – Bart McDonald

13:06 – “Think of compliance as a journey, as a road trip. You've got a certain amount of things that you need to get done and you've got 365 days to get them done in. Create a map, create a checklist, create a calendar on what you're going to do and when you're going to do it. Don't wait till the end of the year to do all your testing. Do things throughout the course of the year. If you're a big picture person, no matter how much you know the rules, no matter how much you know the laws, no matter how long you've been in the industry, you still have to have that. And if you're not a detailed organized person and you have the resources, hire somebody that is, that can be that navigator for your compliance program.” – Louis Dempsey

34:24 – “Your weakest link is probably your reps. So, you really, especially from a customer information standpoint, so you really want to put some good training together. And, you know, I know that can be “here, do this, you know, this webinar” or “do this little read this,” but you really want to, you know, get in front of them. And, you know, like with anything—like with my kids—you got to say it three times before they hear it. So you really want to push that training.” – Bart McDonald

Welcome back to the Compliance In Context podcast! On today’s show, we will be taking an in-depth look at one of talked compliance items from the first half of the year, the two new recently published FAQs to the SEC Marketing Rule.  To help guide us through the conversation, we welcome in Issa Hanna from Eversheds Sutherland and Ted McKutcheon from Securities Law Counsel.  In our Headlines section, we review a recent denial from the SEC of an attempt by 16 firms to revise settlements they made with the commission regarding their supervision of employees’ off-channel communications, and finally, we close up today with another installment of What’s On My Mind, where we review a quote from a famous chef and author to help provide us in the compliance space with a little bit of satisfaction and peace of mind at this time of year.

Show

Headlines

Interview with Issa Hanna and Ted McKutcheon

What’s On My Mind

Quotes

13:21 – “Folks will recall that the Marketing Rule was officially adopted at the very tail end of the Clayton-era SEC…There were lots of issues that were debated from an interpretive perspective under the rule that fit there. And you had this new category of performance that the SEC seemed to have just made up out of thin air called (so-called) extracted performance. And folks were, kind of, struggling to, kind of, figure out how existing practices in the industry, particularly the private fund industry, would fit into that category of performance.” – Issa Hanna 

40:53 – “Remember that, sure, we're getting some relief with respect to the net of fees requirement here, and certain circumstances. It doesn't necessarily get you an out from the Marketing Rule altogether. That's a really important thing to remember is that if the extracted performance that you're dealing with is still an offer of your advisory services or an offer of a private fund that you're advising, you know, that's still an advertisement subject to other applicable requirements of the rule, including the general prohibitions of the rule. So, you know, you do have to keep that in mind.” – Issa Hanna 

44:45 – “The part of the approach that's deemed okay with respect to the principle of making fair and balanced presentations is this layered disclosure or layered approach to disclosure which is consistent with, you know, something like putting a note referring the consumer of the advertisement, and in this case, the net gross presentation of the gross presentation to disclosure and net presentation located in another part of the document.” – Ted McCutcheon 

Three files total.  Since I was only able to upload one file here, I added the other two files into the shared Dropbox folder.  Please try to enhance the audio as much as possible and if you're able to get the editing completed sooner, it would be greatly appreciated.  Thank you so much for all the help!

Welcome back to the Compliance In Context podcast! On today’s show, we will be reviewing a multitude of regulatory and compliance topics, including artificial intelligence, books and records, types of marketing materials, the SEC Marketing Rule, post-commitment management fees, private fund recycling, and many more fantastic issues in our first ever Compliance Grab Bag!  To help guide us through the conversation, we welcome in Christine Schleppergrell from Morgan Lewis and Christopher Mulligan from Weil Gotshal.  In our Headlines section, we review the first Advisers Act enforcement action under the new administration and what it tells us about future actions, and we close up today with another installment of What’s On My Mind, where a recent statement from Commissioner Peirce provides us deep insight into the future state of crypto and digital currencies and the road ahead.

Show

Headlines

Interview with Christine Schleppegrell and Chris Mulligan

What’s On My Mind

Quotes

15:17 - “There’s a temptation. So there are temptations on both sides, on the exam side and on the registrant side here, right? So investment advisors, obviously AI is a huge force in the economy and investing, and people what to talk about it. And that’s fine in terms of talking about, you know, how this is going to impact markets, how this is going to impact due diligence processes generally, right? You, sort of, can’t live today and not talk about AI. That’s fine. The problem is it’s easy to, sort of, fall into, it’s easy to fall into the representation of how you either use it, how you look for portfolio companies that use it, how it’s part of your management process, right? So it goes to, sort of, a high-level discussion of AI in our, sort of, you know, in, sort of, our culture and our society. And it goes into specific representations about how you are using it.” - Chris  

17:25 - “I think also the other side of the coin is the use of AI for non-investment purposes, so think compliance, operational purposes, to the point that you made earlier, just assessing staffing needs and how those can be addressed, and AI can be a huge time saver. So we’re looking at firms that are, we’re seeing firms that are considering whether they should disclose, for example, in their form ADV, the use of artificial intelligence, even if it is for that internal use case only that we talked about at the top of the podcast.” - Christine 

26:32 - “As they move forward in their journey of creating new communications using AI, maybe to create those communications, it makes it easier if they have that framework in place and they said, ‘Okay, well this looks like the other communications, it’s not an advertisement because X, Y, and Z.’ So it’s a very easy filtering mechanism to use. So just wanted to amplify that point because I think it’s really good. And then one thing to add, I know as we’re talking about back to basics, one thing that I keep going back to and keep getting the question is, ‘What is hypothetical performance?’ So I think that, in addition to what is an advertisement, are two of the really big picture questions that keep coming up, even though we’ve been living with this rule for some time now. But those two concepts because they are broadly defined, especially hypothetical performance, I think really trips people up.” - Christine 

36:57 - “I have a great answer to your question of, ‘Do disclosures have to be on the same page?’ And the answer, the universal answer to that question is, it depends on how many pages you have. If you have a 50-page pitch deck, then I do not think that the hypothetical performance, the mention of that can make its first appearance on slide 49..” - Christine 

Welcome back to the Compliance in Context Podcast! On today’s show, we feature a Lessons From The Front Lines episode where we will be providing a comprehensive, deep-dive look at the 2024 SEC Enforcement numbers published at the end of last year—including what was behind some of the eye-popping numbers, distinct areas of focus, and what firms can expect next under a Paul Atkins-led SEC. To help guide us through this important topic and share some fantastic insights for our listeners, we welcome a fantastic panel of experts, Brian Rubin from Eversheds Sutherland and Jim Lundy from Foley and Lardner.  

Show 

 Interview with Brian Rubin and Jim Lundy 

Quotes 

11:22 - “Speaking of past data not being indicative of future results. In fiscal year ‘24, the commission brought cases against more than 70 firms, resulting in $600 million more in additional penalties, for those of us who’ve been living through this for the past several years. There’s no surprise that prior to January 2025, that leads to some pretty big numbers. And in the release, enforcement touted that since December of 2021, the initiatives in this space have resulted in changes against more than 100 firms and civil penalties in excess of $2 billion. As Brian mentioned, enforcement continued to be busy after the election through its first fiscal quarter for this fiscal year. And recently announced on January 13th, 12 more actions brought against nine investment advisors and three broker-dealers for off-platform books and records, record-keeping violations, and an additional $63.1 million in total penalties brought against those 12 firms” - Jim  

23:17 - “We have a list of a few things that may happen. So, one of them is that there’s probably going to be a push to reduce the time that it takes to investigate cases. Everybody on the defense side and on the enforcement side thinks it takes too long and there’s a variety of reasons that it does take a while. One idea is a simple idea to just simply shorten the time period that investigations have. And although President Trump said he did not read Project 2025, which was a huge sort of white paper on things the new administration could do, one of the recommendations it contained called for statutorily limiting the time for investigations to two years.” - Brian  

32:25 - “My personal view, I’m sure Brian would agree, but testimony sessions are one of the most important aspects of the investigated process for all involved: for the staff, for defense counsel, and (while it can be uncomfortable) for most importantly, the witness. When I went into private practice in 2016, I represented a CEO of a firm. They wanted him for three days. We ended up doing two and a half. It was the other end of the extreme. It was too much. But really, that testimony and most transcripts became incredibly important (in the Wells process that Brian was just talking about) and allowed us to get a really positive result for the client. And I don’t know if we would be afforded that level of interaction in an in-person testimony session today because it’s really the pendulum, I think, flowing too far in the other direction. And what you started to see is brief virtual sessions, with all due respect to the staff, becoming a little too cavalier. A little sloppy. Exhibits are cumbersome to use. Less exhibits were being used. And some of it’s not surprising. It’s just, it’s human nature.” - Jim  

Resources:

Compliance in Context Contact Form 

LinkedIn: Compliance in Context, NSCP

Twitter: @compliancepod

Websites: Compliance in Context, NSCP

Welcome back to the Compliance In Context podcast! On today’s show, we welcome in former NSCP Chair and current CCO of Robinhood, Norm Ashkenas, to discuss how firms can build a culture of compliance inside their firms and what it takes to build out an effective compliance team. In our Headlines section, the SEC Investor Advisory Committee considered draft recommendations on mandatory arbitration clauses and the expansion of retail investor access to alternative assets (among other items), and a dually registered firm settled SEC charges for failing to timely investigate and report suspicious transactions to FinCEN. And finally, we'll wrap up today's show with another installment of What’s On My Mind, where an old quote from Winnie the Pooh might just be the best thing we can do for our friends and loved ones during the holidays and these cold winter months.

Show

Headlines

Interview with Norm Ashkenas

What’s On My Mind

Quotes

12:20 – “Somebody I didn’t know reached out to me via Slack and said, ‘Hey, so-and-so senior executive thought I should reach out to you because we’re thinking about doing A and he said ‘You should talk to Norm and compliance first to see what they think and how to get it done.’’ That’s what I want to have happen. It’s not about me, it’s about somebody else thinking of compliance when we weren’t there.” – Norm Ashkenas

22:15 – “If you’re asking questions, certainly you’re starting with the technical expertise. If you’re looking for somebody who does surveillance on municipal securities, they have to know a great deal about that space to start, if that’s what you want them to do. So certainly you’re testing for that. Obviously, you are certainly looking for culture fits, again, another overused phrase. But if your firm is the type of firm that seeks to get alignment from everybody and its a firm where they don’t want somebody to present a solution, they want to have conversations with everybody who might be a stakeholder, get them all on the same page, and then have a final discussion, you need to find people who can do that kind of thing. If it’s a firm that’s more entrepreneurial, where it’s, ‘We want you to go solve the problems and see how many people react,’ you have to try to ask questions to glean what that is. So it does start with ‘What is your firm looking for after you hit the technical expertise?’ And then you also certainly want to ask how they fit into your overall compliance program and team. Complimentary skillsets are helpful. Like, you need, yes you want technical expertise, but in some cases, it’s ‘Am I hiring somebody to do this job in front of them for the next two or three years? Or am I hiring somebody who I think can do much more than this or different things? Am I hiring–I’ll use the phrase–a pocket knife? Somebody who’s got a multiplicity of things they can do. And I see them doing a number of different things. Those are things you’ve got to think about as you’re doing the hiring.” – Norm Ashkenas

38:06 – “Yeah, so interviewing is clearly important. Once you’ve got folks that you’ve determined might be qualified for the role, you wanna speak with them. And one of the things that we do here at Robin Hood, at least, is have... You use word banks; we often have question banks. I have some in my head, but I’ve been asked to put them down on paper, which is actually helpful exercise. And then when you build out for the interviews, you build out your diverse slate of interviewers to make sure you’ve got business partners; you’ve got oversight partners. You don’t have everybody sitting in front of them. Look just like you when you’re doing the interviews, reflect the firm and, yes, give them topics. Give them subject areas. Give them what to test on. And yes, you’re gonna have some sample questions. Sometimes it’s gonna be hypotheticals. I love giving candidates hypotheticals and, I’m not looking to get a right answer per se. It’s not about that. It’s about understanding how they think about whatever that is.” – Norm Ashkenas

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

Interview with Ranah Esmaili and Louis Froelich

Outtakes

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 fraud cases, cases involved in this appropriation, Ponzi schemes, maybe even insider trading cases. But that will, of course, depend on whether crypto assets are considered to be securities going forward. But those are really a significant portion of the cases that the SEC is bringing right now. So I think much is going to change, but some will stay the same.” ~ Ranah Esmaili

28:43 – “Until and unless there is, you know, clearer guidance or new guidance rules, new legislation, that kind of provide clarity related to digital assets, and whether there’s securities along the lines of what Louis was just talking about. You know, I think this audience and the compliance officers listening should really just assume that all the same rules and regs apply today. And that may very well change, but I just want to start with that note that there’s no change coming today. We’ve got a few months before, you know, the new, kind of, CFTC leadership will, you know, take the reins. And so for now the current state of play is the current state of play. So just don’t let your guard down.” ~ Ranah Esmaili

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

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

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

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 those in both an exam and enforcement context.” – Igor Rozenblit

27:01 – “So I think you’re going to see more regulation by enforcement to get their message out about particular practices that they find problematic. And there are lots of different themes you’re going to see—that you’re continuing to see from the exams. And if anything, it’s more to building the case that they are—that this is an area of law that needs regulation and needs sort of very specific principle-based rules. Let me show you by bringing a bunch of cases and showing a bunch of exam issues that get referred, and the more you’re able to cite to it, the more sort of groundswell you have to prove, from a prophylactic perspective, these principled-based rules are required, or these actually more prescriptive-based rules are required because there is fraud going on.” – Alpa Patel

40:16 – “And to be frank, like the technological solutions aren’t great. And I think advisors have really struggled with how are we supposed to monitor, you know, some forms of communication, but have really put the time and the resources into try to get on the right side of this issue. And as Igor will say, like, it’s still hard. The surveillance piece is still hard, no matter if you as the advisor, do everything correctly, trying to get it right with your employees is not easy. And if they are going to sort of really pick apart procedures and actual surveillance practices, we’re in trouble. And I think they know, there’s sort of not a great answer to that other than hoping that they show some judicious application of the rules here.” – Alpa Patel