Australian compliance professional, Kenneth Swiss, tells of tumultuous times on Wall Street since he arrived in August
How does your role fit into the overall structure of Deutsche Bank?
My role is to coordinate and execute policy and training initiatives for the fixed income division of Deutsche Bank’s broker-dealer in Manhattan, New York. Broker-dealer is the US term for securities firm. Nothing about the inner workings of an investment bank can be explained simply – but in its most simplistic terms – the team I work in is just one arm of compliance – namely, fixed income advisory.
This group supports the fixed income divisions of Deutsche Bank’s securities operations. These people sell, trade, structure and originate a myriad of products and engage in a range of activities such as “vanilla” government and corporate debt (including investment, high yield and distressed debt), loan syndication, credit default swaps, collateralised debt obligations (CMOs, CLOs etc), futures, foreign exchange, commodities and similar debt products. My role within this framework is to support the highly knowledgeable and skilled professionals who directly advise these businesses.
My role comes into play, for example, if the US regulators or legislature adopts new laws that affect the way we do business. I would work with the advisors, business and other stakeholders in creating new policy on how the business would conduct those activities. Then we would train them on the requirements. Simple, really!
What elements of your role do you find the most challenging?
The most challenging part of my role so far has been adapting to the US-style of regulation. The US has, unlike Australia for example, numerous agencies and other SROs, such as exchanges, which each have a direct role in overseeing regulation of the financial services industry.
The US is a highly complex legal and regulatory regime and it is common to have jurisdictions overlapping between regulators. Getting your head around all of them is challenging. This, coming from a more principle-based regimes, is hard to absorb and even harder to re-program yourself into thinking in terms of a more prescriptive approach to law and regulation.
What are some of the major issues you have had to deal with recently? How do they compare to your previous roles?
My arrival at the bank in August last year was shortly followed by the subprime meltdown which heavily affected the industry. This was later followed by the disclosure of events at Société Générale and more recently the imploding of Bear Sterns. The financial services industry, and Wall Street in particular, has probably not seen this type of upheaval for a while.
All this is happening concurrently when I am trying to get myself up-to-speed on the US regulatory regime. It is like trying to build a house on quicksand as things are changing almost daily. Change is almost always good and hopefully this will only make the market stronger. While my most recent experience in the US cannot be compared with previous roles, the process involved in changing roles and learning a whole new regime is something I now feel comfortable with.
This is the third country where I have been involved in the financial services industry. Each time it gets easy as the concepts are usually the same. In most cases it is just the terminology, and of course acronyms, which change. This particular role has helped me to round off my previous experiences as a lawyer in private practice, as in-house counsel separately for the stock and futures exchanges (SFE and ASX – before they merged), then as a regulator in the Middle East.
It is helpful to be able to see things thought the eyes of each of these people when confronted with an issue. The “30,000 foot view”, as they call it here, is an important view to have. Another challenge, a touch unexpectedly, is cultural and language-based. Wall Street tends to be very US-centric and the expressions, jargon and other terminology take some getting used to. Though I am happy to report that has been a two-way street.
Despite being one of the few Australians in the investment bank (that I have found anyway) – I am trying to introduce my US colleagues to meat pies, sausage rolls, lamingtons and of course, vegemite sangers.
‘Compliance culture’ is a common term nowadays. How important is this concept to your work?
I am glad you mentioned it. This is a term bandied around without, in my view, a true appreciation for what it means and where is comes from. Compliance is a function – whereas a ‘compliance culture’ is a mindset. What I have come to believe is that this is a concept or ideology which is best embraced and driven by the business – rather than compliance. If senior management in the business are atheists on the concept, or at best agnostic, then efforts by compliance to instil a compliance culture will be futile.
Because the fixed income compliance team work so closely with the business, the experience here has been a positive one. The compliance culture is something not just accepted, but embraced. My view is that an organisation that ignores or rejects a compliance culture does so at its own peril. And I’m not just saying that because I work in compliance!
When I left Australia in 2004 I found that the culture of compliance was well on its way. Long gone are the days of a meeting with the compliance team associated with a root canal. I hope that this trend continues.
How do you think the compliance role in the banking/financial sector will evolve?
Our team is called “compliance advisory” which I think is telling of the recent past and future of compliance teams within investment banks. As the industry increasingly becomes more complex and globalised, my personal view is that compliance will continue to evolve as an advisor – not just gatekeeper of compliance manuals and procedures. I think the compliance officer is now more thought of as the trusted advisor than the barrier to business to be avoided at all costs.
Observing my colleagues in action over the past months I have seen how they help facilitate business. They play the role of expert in navigating deals through the choppy waters of US regulation. While I doubt that in all cases the business appreciates the role which is played, without it real trouble lurks behind every rule and provision of the regulators rulebook. I think the true value-add of the compliance department has yet to be accurately assessed.
What is the usual career path to your position, has it/is it changing?
I am probably not qualified to speak on how the compliance officer career path has changed. I wake up most mornings trying to figure out how I started out as a commercial litigator in Brisbane and ended up in compliance on Wall Street. But compliance is like that though.
I cannot recall a single person I knew at high school or university that said they were destined, or indeed strove to be, a compliance officer. When was the last time your four-year-old tugged on your sleeve and added compliance officer to the list of fireman, doctor or nurse? Sadly, I don’t think we are anywhere near that changing in the medium term.
In Australia the career path was commonly from a regulator or other regulatory body such as SFE or ASX, or from a legal firm that supported a compliance department. Here in the US it seems that still holds true, but there is more sourcing from private practice. This is probably because of the more complex nature of US regulation and the more black-letter regime here which lends itself to a legal background.
What are some of the major challenges ahead for compliance staff in general and in the banking/financial sector specifically?
The greatest challenges that I see for compliance is staying ahead of ever faster changing industry developments, and ensuring that internal systems and controls are able to nimbly adapt. Throughout the course of this year we are likely to see multiple regulators making significant changes to their rulebooks which will have a major impact on compliance departments around the world.
There have been recent calls by the Secretary of the US Treasury for even greater regulation. The level of regulation is the perennial debate between the industry and regulators. It would appear we are in a time when the pendulum is swinging back towards greater government involvement. It will no doubt be an interesting year and compliance departments everywhere will earn their keep.
Philosophically, I think the compliance industry will be forced in the coming years to challenge its view of itself as it gets closer and ever more relied upon by the business, while at all times retaining its independence. I pose the question of whether the term ‘compliance’ still is, or will be, accurate? No doubt one day some bright spark will come up with a new name that is a little more warm and fuzzy and which people will embrace. Then maybe your four-year-old will add this career to their list.
What advice would you have for someone interested in working in your field?
My advice is to stop, look outside your window and think hard about becoming a marine biologist instead. But if you really want to work in financial services compliance for an investment bank, the path you take will usually be via the securities arm of a well-regarded law firm, a securities or derivatives exchange or financial services regulators, such as ASIC. These I think will be your best bets.
Unfortunately – or fortunately, depending on which way you look at it – investment banks can afford to be choosy in the hiring process because the compensation tends to be higher than other industries, meaning they attract a lot of candidates for each position. This plainly means you will be up against a greater number of talented folk. My advice is to differentiate yourself.
Are you an intellectual? If so, be able to demonstrate that. If you are the ‘go-getter’ type, make sure people know that. Are you well-travelled, speak a gazillion languages or ever conquered Mt Everest? Make that your point of differentiation. Words are cheap so make sure you are able to point to actual events or things you can point to which show your talents. Interviewers know what they are looking for and being able to demonstrate these qualities will be important.
Lastly, network. If you know someone at an investment bank (and this applies to any job really) ask them if they will check their internal job vacancies for you. If there is a job you are after – ask them to forward your résumé to their HR department on your behalf with a personal recommendation. This might help get your résumé near the top of the pile. Good luck, but make sure you think about marine biology first.
Kenneth Swiss is vice-president, global markets compliance, Deutsche Bank Securities
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