New DIM boss touts transparency, engagement to boost compliance, SEC-industry relations

The right information at the right time can help IAs help themselves with compliance, resolve conflicts with SEC

Fund directors aren’t likely to see any big changes in policy or regulatory priority following turnover at the top of the SEC’s Division of Investment Management, according to one industry association leader.

Regulatory policy is set, so it’s very unlikely new DIM director Natasha Vij Greiner will initiate big changes in controversial regulatory proposals that weren’t already in the works, Investment Adviser Association president and CEO Karen Barr said shortly after the  IAA Compliance Conference.

The conference, which took place March 6-8, featured the last appearance of William Birdthistle as DIM director, as well as the last appearance by his replacement, Division of Examinations deputy Natasha Vij Greiner, before she took over as head of DIM March 11.

“The regulatory agenda has been set and is in motion. I don’t expect to see major changes in that process due to Natasha taking over as division director,” Barr said.

Natasha Vij Greiner, director, SEC Div. Investment Management

Greiner’s appointment could change the way the DIM interacts with registered investment companies, however, especially if her appointment was a conscious effort to answer widespread criticism that the SEC’s regulatory agenda relies far too much on academic theory and far too little on practical experience.

SEC commissioner Mark Uyeda and Investment Company Institute (ICI) president Eric Pan have both accused the SEC of focusing too much effort on rulemaking that prioritizes threats that make for a good discussion in the classroom rather than those that show up in the real world.

Birdthistle – who served as director of the DIM for two years before resigning March 8 to return to his career in academia – is often cited as the leading example of overacademic rulemaking within the SEC. He was far from the only academic high in the ranks, but also took flack for his contribution to DIM-sponsored rules that have generated intense opposition from the industry, including still-pending rule proposals on swing-pricing and artificial intelligence.

Greiner, meanwhile, is a 23-year SEC veteran with nuts-and-bolts experience in the process of regulating funds and evaluating their compliance. Before her promotion, Greiner worked in the SEC Division of Examinations as deputy director and national associate director of the Investment Adviser/Investment Company Examination Program.

She joined the agency in 2001 and spent most of the next two decades in the Exams and Enforcement divisions, with a detour to the Division of Trading and Markets that lasted until she returned to the Exams division in 2019, according to her LinkedIn.

“The Exams division is really the boots on the ground at the SEC,” Barr said. “They train internally on new rules and then go out in the field and make sure those rules are being implemented, and implemented well.

“They see how the rollout plays out,” Barr said. “That’s valuable experience she’s bringing to her role as division director.”

The information examiners bring back is shared among other divisions, which gives those reports significant impact “whether it’s for particular rulemaking or just in terms of how the rules are going to work,” Greiner said.

William Birdthistle, former director DIM

Examinations are a good way to collect evidence, but their goal is to push registered investment companies toward compliance, not simply catch them when they fail, so the division puts significant effort into identifying topics that are posing problems for registered investment companies and putting together information that will help them solve the problems on their own.

“We’ve been trying to increase engagement with our stakeholders, whether it’s industry or industry groups,” Greiner said. “We spend a lot of time thinking about ways we can increase transparency through our publication priorities [and] allocation of risk alertsto provide valuable tools to the industry and the CCOs they can use to promote compliance within their firms.”

“We want them to be able to advocate within their own firms, whether it’s in a budget resource meeting or something else where they can take the information we provide and say, ‘These are the topics the SEC is going to be looking at this year. I need more resources for that, and these are the areas we should plan for our own purposes.’”

“We get really great engagement and so we want to continue to do that,” Greiner said.

Greiner also makes the effort when meeting with registrants to explain the risk-based process the division uses to choose which companies to examine, she said. This led to the decision to publish sample documents, including a sample initial document request that can help registrants respond to queries or prepare for exams.

“It’s my hope that approach will continue even after I’m off to another job,” she said. “I know there are a lot of risk alerts in the pipeline but there are additional alerts that are not specific to particular rules or initiatives, that are more about our program and how we think, which can also increase transparency.”

Transparency is a means to an end, however, and any type of information the division puts out can help a registrant to avoid compliance problems, she said.

Examinations that highlight a potential compliance problem can help a registrant avoid or reduce penalties, for example.

Write-ups of compliance cases and enforcement actions are announcements of some other company’s failure, but the Exams division tries to write them to highlight specific issues that could also be applicable to other firms.

“We’re trying to make sure that, even though we may not be examining you, we want you to go back and take a look at these cases so that if you can proactively remediate if you have an issue,” she said.

An exam letter makes people nervous, but most companies recognize the value of complete and timely compliance information whether it comes in a risk alert, the wrap-up Examination Priorities normally published in October, or other formats.

“We’ve gotten a lot of really positive feedback from the industry on things we’ve been doing over the last year or two,” Greiner said.

The difference in reputation between Greiner’s old division and her new one was not lost on her.

“When I was talking to Wiliam [Birdthistle], he said they don’t get a lot of fan letters,” she said. “I think we do. I think that will continue.”