AN INTROSPECTIVE ON CORN FIELDS AND BLOCKCHAIN THROUGH COMPLIANCE GOGGLES

Chances are if you grew up in the Midwest, at some point you heard your parents or grandparents longingly say “I remember when this was just a cornfield”. Whether they were referring to a modern building, a factory, a shopping mall, or some other sign of the changing times.

When my parents used to refer to these cornfields in Michigan, where I grew up, I didn’t know whether to roll my eyes or to feel a little sorry for them. I would wonder why they had this nostalgic connection to a cornfield? Was it just that they, like most people, were reluctant to change, even if that change meant a better way of life for everyone?

When I joined iownit it was in its early stages of development. The two co-founders were intent on using Blockchain technology to enable digital transactions in private securities. It was an evolution into digital that I believed was necessary. I came to the team with the confidence of knowing how traditional brokerage firms managed compliance and private placement processes from beginning to end. 

I quickly realized that what I knew about the process was valuable, but how I applied those concepts was less valuable to the team. The traditional compliance processes may have been a good foundation to guide our evolution, but most of the compliance processes traditional firms follow are outdated and actually represent what iownit is solving for.

Many of us, no matter the decade during which we grew up, probably have some resistance to change. In my case, I try to remain conscious of how the benefits of change outweigh the inevitable discomfort of having to learn how to do something differently. This is especially true if the old way isn’t broken! As a seasoned financial service and compliance professional (ie old), I am naturally inclined to stick with the time tested and proven method of doing my job rather than seek a new, unproven method.

During the mid-90s, I began my career in financial services on the trading desk at Cornerstone Securities where at the end of each trading day we would stuff the printers with reams and reams of paper to print that day’s trading activity for review, approval, and our initials. We would then store all the paper in a never-ending wall of filing cabinets to be prepared for the next regulatory examination. Over time, regulators began to require that we provide them the documents digitally via CDs filled with the scanned trading information. The regulatory examination practice evolved further, as it began taking place mainly through the receipt of requests from regulators and submission of the requested documents through a web portal. 

Despite this “evolution” in process, what had really changed? The information regulators were asking for was the same. Technology simply changed the way we communicated and shared that information.

Now I find myself looking back at my own nostalgic cornfields. I often reflect back on the early years when compliance in financial services was in its infancy and we were struggling to prove our value to our seasoned employees. In their minds, they had conducted their business without the cost and complications of compliance staff and they had done so just fine for many years. However, as time went on, the culture shifted and compliance started to get invited to sales meetings, new product idea pitches, and marketing brainstorming sessions. 

Many leadership teams made it mandatory to include compliance in the early stages of any new project to ensure regulations were considered before the teams had gone too far. Interestingly, despite this welcome change, the technology groups at most firms typically acted in their own silos, focused on data production and user interfaces, while working within the guidelines compliance had already approved. Why would compliance and technology ever need to interact? Not long ago, my own “cornfield mentality” was brought to light. 

Every other week, the management team at iownit meets to discuss current and upcoming projects across the company. During a recent presentation, I was interrupted by our Chief Technology Officer, and he politely asked me how much time I spent on a routine review of a certain recurring task. When I answered ‘about two hours a week’ I noticed he sat up in his chair as if he misunderstood me. He then asked about another project and another recurring task, and another. As I responded about each task or project, I could see the look on the faces of my peers during our video call change and recognized their expressions as the one I would make when my parents recalled the forgotten cornfield. At that point, I knew something was about to change. 

Through the collection of rolling eyes and shaking heads, our CTO asked a question for which he already knew the answer; “Is there a reason we can’t create an automated program to review in seconds what currently consumes hours of your time?” I initially found it very hard to relinquish my tried and true methods using folders full of spreadsheets and documents. All I needed to do was let him know what was important to me and he quickly confirmed he could make it work. 

We discussed the other projects and tasks that I was overseeing and found an automated process for nearly all of them. “Is by the end of the week too late?” he asked. I’d often wondered how certain people in my profession seem to always have the time to read articles, reports, and posts that I could rarely find time for. Now I know what their secret sauce is, technology. 

One of the tasks we addressed during this discussion was iownit’s process of onboarding new investors, issuers, and investment intermediaries. The process had to be paper-free but it could also become streamlined and less prone to error. What once took multiple meetings, various approvals, attorneys, and a back-office staff several months to complete, we can now do in a week! Thanks to our collaboration and the application of the technology solution we implemented.

Contrary to popular belief, Compliance and Technology teams do not have to be natural enemies. Quite the opposite, in fact. With the assistance of technology Compliance is no longer the rigid watchdog of the organization, but a modern contributor and enabler of the business. In recent years compliance-related costs have skyrocketed with massive regulatory fines and added headcount. Learning to engage your technology team and working with them to implement automated solutions can help firms realize the financial benefits of these operational efficiencies for years to come.

Before joining iownit, I had worked at traditional firms. We always applied traditional solutions, and often looked at what the crowd was doing, and followed. The opportunity to lead through iownit was one of the many appeals in joining the company. Although I did not know it at the time, the ability to streamline processes through a well-designed platform like iownit is actually pretty exciting. Rather than focusing on how I can keep processes under my control, I focus on how we can apply technology to create greater efficiencies. 

These efficiencies allow me to do my work as the chief compliance officer with greater confidence, as the opportunity for human error is so much lower. I work to make myself “obsolete” through these automated processes, a fact that is highly unlikely in this industry as regulation is constantly evolving and changing. That constant change means that we need to build our systems so that with each change we can easily adapt our existing processes, or build new ones that meet new regulatory requirements and integrate with our existing technology infrastructure. This is only possible through a platform that is adaptable and can evolve with our evolving field.

Meanwhile, all of us at iownit constantly ask ourselves what existing processes can be automated or improved with technology. Sure, the threat of changing something that’s worked before can be scary, but what about the threat of being outdated and slow? At iownit, every time a new regulation is released, a new policy is created, or a new idea to improve a compliance procedure is considered, I make sure our technology team is in the room. One of our goals is to ensure we are quicker and smarter than other platforms so we can provide the best possible experience for investors while adhering to regulatory requirements.

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