Fizza Khan, this week’s guest on the Innovation In Compliance show, has been in regulatory consulting for over 10 years. She is the CEO and founder of Silver Regulatory Associates, an innovative company that specializes in helping companies meet their regulatory obligations. She and Tom Fox discuss the idea of outsourced compliance as well as the interesting and often complicated world of cryptocurrency.
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The Cutting Edge of Outsourced Compliance
Tom comments that the regulatory compliance space has different guidelines, regulations and laws than his world of ABC compliance. He asks Fizza to describe some of the cutting edge things her company is doing, in particular the idea of ‘outsourced compliance’. She replies that financial services companies must have a strong regulatory compliance program that’s not only good on paper, but practically functioning. Her company, as an outsourced compliance option, can help firms meet their obligations either by integrating into their compliance program or by working alongside an existing compliance program to ensure that it aligns with the client’s interests.
Silver Regulatory Associates offers various services depending on your needs. These include:
- Registration and foundation services
- Maintenance service
- Assessment service
- Exam support service
Crypto: Security or Exchange Instrument?
There are many questions surrounding cryptocurrency. Whether it is a security or an exchange instrument is one of the questions facing the industry. Fizza explains that the Howey Test is used to determine whether a particular instrument will be deemed a security and needs to come under the SEC’s regulations. The test makes its determination based on three criteria:
- Is the investment in the form of money?
- Is the investment of money in a common enterprise?
- Is there an expectation of profits from the enterprise? Is that expectation of profit derived from the efforts of others?
Tom asks Fizza to discuss what a company must do if it’s determined to be a security vs an exchange instrument, and how her company can help them fulfill their regulatory obligations. She explains the implications of each scenario. Her company helps clients determine the next steps and take appropriate action to become compliant, she says. Continuous analysis and monitoring of cryptocurrency guidelines is paramount. If a company changes the way it uses, manages or distributes its cryptocurrency, this could trigger additional regulatory requirements.
Preparing for the SEC Exam
Tom mentions an article Fizza wrote, entitled, Uptick In SEC Exams: Four Ways To Ensure A Smooth Process. He asks her to explain how she helps companies prepare for such an exam. She replies that the article targets investment managers and broker dealers who are already regulated and registered with the SEC. The routine exam is when SEC staff examiners come to organizations to ensure that their compliance program is meeting all regulatory obligations. They also want to see that the program is being actively implemented in the business. Silver helps you prepare for a smooth exam: they analyze your existing program, help you prepare the required documents, and they even prepare you to answer questions the SEC might pose. Fizza gives several tips to help you highlight your strengths in the Day One presentation.