by Cara Bain
Some industries have been feeling the heat of a very active regulatory environment, while other industries have been advocating for increased regulation. In both instances, one tactic that organizations may use is to add another, less common role to their C-suite: the Chief Regulatory Officer.
While not as common as a general counsel or chief compliance officer, we are seeing an increase in these roles in organizations in industries that are navigating complex or active regulatory environments, such as financial services and life sciences. On the opposite end of the spectrum, companies in industries without robust regulatory landscapes, such as decentralized finance and artificial intelligence, anticipate—and in many cases need—increased regulation to provide clarity, and chief regulatory officers may help achieve those goals. The latter instance is more common with start-ups and early-stage companies.
Unlike similar legal and compliance leadership roles, including general counsel, chief legal officers and chief compliance officers, the chief regulatory officer role is often more dynamic, blending a variety of traditional functions. Generally, a chief regulatory officer is responsible for overseeing and coordinating the regulatory strategy of the company and managing global, where applicable, regulatory risk. A chief regulatory officer can help bridge or supplement legal and compliance—and in some cases other functions such as government affairs and marketing— and create operational efficiencies.
In many instances, however, this role differs from company to company as the parameters of the role are based on what best serves the organization. For example, organizations might appoint a chief regulatory officer to navigate and shape or influence potential future regulation that could have a make-or-break impact on the business. This role may also be used to signal, internally and externally, that the person in the role has a strong regulatory background. In some cases, companies recognizing the critical impact of the regulatory function on their business may opt to appoint a chief regulatory officer instead of a head of regulatory affairs in order to give their most senior regulatory specialist a place in the C-suite.
In some or even many organizations, the chief regulatory officer is not a standalone role, and the title is often paired with the general counsel or chief compliance officer title. This is especially true in the start-up space where innovation outpaces regulation, and savvy companies recognize the critical impact of future regulation on their business. We tend to see standalone chief regulatory officers in more traditional, institutional and/or larger organizations.
CHIEF REGULATORY OFFICERS IN FINANCIAL MARKETS
In financial markets, the chief regulatory officer is a common role with more universally defined responsibilities, particularly at self-regulatory organizations including securities and commodities exchanges. A self-regulatory organization is a non-governmental organization with the authority to regulate the operations of its member organizations by promulgating and enforcing rules, and therefore, the chief regulatory officer’s function is imperative to the organization.
In these organizations, the chief regulatory officer generally oversees the administration of an exchange’s regulatory function. The person in this role is likely responsible for tasks including designing and promoting compliance with the exchange’s rules and regulations by its member organizations. He or she also likely serves as the main point of contact and engagement with the exchange’s primary regulator and oversees the coordination of regulatory activities on an ongoing basis with regulatory departments at other exchanges.
As of late, regulators have signaled an increased focus on this role. Recently, the Commodity Futures Trading Commission (CFTC) proposed a rule including requirements regarding the parameters of the chief regulatory officer role. Specifically, the CFTC proposed to require, in part, that designated contract markets (DCMs) appoint a chief regulatory officer to administer the DCMs regulatory function, with the chief regulatory officer having supervisory authority over all staff performing the DCM’s market regulation function. The rule also proposed that the chief regulatory officer report to the board or the senior officer (likely the CEO) of the DCM. While it remains to be seen whether the rule or this portion will be adopted, the proposal emphasizes the level of responsibility that regulators view as attendant to this role.
DIFFERENCES BETWEEN A CHIEF REGULATORY OFFICER AND A CHIEF COMPLIANCE OFFICER
A chief regulatory officer and a chief compliance officer both serve one key, overarching purpose: to help the business safely achieve its goals, accounting for applicable global regulators and regulations.
However, when a company has both a chief regulatory officer and a chief compliance officer, they likely handle nuanced, separate responsibilities. The chief regulatory officer may focus on directing the firm’s regulatory function, including overseeing an external regulatory strategy and managing risk, whereas the chief compliance officer may focus on ensuring ongoing internal compliance with existing regulations. The chief regulatory officer may oversee staff focused on monitoring regulatory activity on a global basis, maintaining relationships with regulators to stay ahead and abreast of regulatory developments, and responding to regulatory inquiries. Meanwhile, the chief compliance officer may oversee functions that monitor for compliance with applicable regulations and company policies and procedures, like for a financial services firm, core compliance, trade surveillance and audit, to ensure that the firm is sufficiently compliant with current rules and regulations.
A chief compliance officer’s oversight of an organization’s traditional compliance function is table stakes, especially in highly regulated industries. A chief regulatory officer can then add value by taking on some legal and/or compliance tasks when the regulatory framework is complex and/or by making sure the organization has a seat at the table, coordinating with their primary regulators, global regulators and other stakeholders, including peer organizations and trade associations.
RECIPE FOR SUCCESS
Because this is a C-suite role and typically a role that is critical to the organization, many of the skills required of all successful C-suite leaders are also necessary in a chief regulatory officer:
- Interpersonal skills: Given the need for relationship building, advocacy and coordination in this role, chief regulatory officers must have strong interpersonal skills. While high emotional intelligence is a marker for success in many roles, it is particularly important here as chief regulatory officers manage and navigate critical relationships and strategies. Successful chief regulatory officers must be able to build and maintain relationships with legal, legal-adjacent and non-legal professionals and must be able to exercise good judgment and communicate effectively. Active listening skills will equip a chief regulatory officer with the ability to understand what is being said and to read between the lines where necessary.
- Business oriented: A chief regulatory officer must be willing and able to learn the business from top to bottom, including understanding its history, current strategies, and future growth plans and goals. Without a genuine understanding of this context, advocacy and strategic planning efforts will be less impactful. Like a successful and effective general counsel/chief legal officer, chief regulatory officers should be creative, open-minded and solution-oriented to help the business achieve its goals.
- Effective operator: Chief regulatory officers must excel at blending functions, creating and implementing strategies, and building consensus both internally (e.g., with the C-suite and internal committees) and externally (e.g., with industry groups and regulators). A successful chief regulatory officer should be able to identify operational efficiencies, as they may straddle several key areas of a business.
- Leadership presence and gravitas: A chief regulatory officer interfaces with key decision-makers, including the C-suite, partners, and regulators, and they, therefore, must be able to read a room and lead by influence.
- Law degree: While a law degree is not essential for—and does not guarantee success in—this role, it may be a meaningful value add. Having a lawyer in this role, especially one with regulatory experience, makes it more likely that the person in the seat will succeed at navigating relationships with legal teams and think strategically within legal confines and frameworks. As many companies increasingly look to hire lawyers for the chief compliance officer role, we believe that they will do the same for this role, too.
Because of the breadth of the skillset needed to excel in tying these functions together, chief regulatory officer roles tend to be staffed by high-performance, highly intelligent, dynamic leaders who can easily scale a learning curve.
TRENDS IN THE CHIEF REGULATORY OFFICER ROLE
Given recent active regulatory environments, periods of exponential innovation and the continued growth of private equity, we anticipate that many companies will consider adding this role to their C-suite in the future. Having a chief regulatory officer as part of a thoughtful legal and compliance structure can signal to regulators that the organization takes its regulatory and compliance function seriously. Indeed, having a chief regulatory officer may give organizations an edge over competitors who do not have one. It is easy to see how this role might evolve and become more commonplace—and how organizations can justify adding a chief regulatory officer to their bench.
ABOUT THE AUTHOR
Cara Bain is a Director in Major, Lindsey & Africa’s In-House Counsel Recruiting team. She partners with global, national, and regional organizations to help identify and staff their legal, compliance, regulatory, and government affairs teams, including at the leadership level. Prior to joining Major, Lindsey & Africa, Cara spent nearly a decade practicing law in the financial services regulatory space, including at a global law firm, as an Assistant General Counsel in FINRA’s Office of General Counsel, and most recently as an Assistant General Counsel in Robinhood’s Regulatory group.
