Can you tell us a bit about Audax?
Jason: Audax Group is a private funds manager with over 250 employees and $23 billion in assets under management. We have a private equity business that focuses primarily on leveraged buyout investments in the lower middle market and a private credit business that lends primarily to middle market companies in support of third-party PE-backed buyouts. We’ve been around for a little over 20 years and we have offices in Boston, New York, and San Francisco.
Can you tell us about your path to becoming CCO at Audax Group?
Jason: When I went to law school, I had no idea that I would eventually become a CCO. Like most law students, I thought I would be arguing cases before the Supreme Court. I quickly found out that not everybody does that.
After law school, I got a job in Boston and focused primarily on private equity fund formations and regulatory work. I gravitated towards fund work because it was a nice mix between regulatory law and deal work. It also didn’t have the same craziness that transactional work often did, where you would be working 24/7 for two weeks and then dead the next. I liked that it was more balanced.
From there, I expanded into other types of fund work, including hedge funds, real estate funds, and credit funds. I also did my fair share of regulatory work and dabbled some in secondary transactions and mutual funds. As a result, I became a more balanced investment management attorney.
After a number of years at the law firm, I decided to make the jump in-house. I had always wanted to work in-house at some point in my career and when the right opportunity came along, I took it. I started at Audax in 2015 and did a mix of compliance and fund work for the first few years. During that time, I supported our CCO, who also split his time between compliance and fund work. I then started taking on more and more compliance responsibilities as he transitioned more to solely fund work and eventually, I transitioned to compliance full time. I took over the role of CCO in August 2020.
What is important for success in a compliance role?
Jason: I think to be successful you have to find out what’s interesting about compliance for you. People often come to compliance from either a legal or an accounting background – two different sets of skills and often different backgrounds and interests. In my experience, accountants are very good about seeing things in terms of process-oriented checks and controls. Legal work tends to be more analysis driven where you are figuring out what regulators or courts are saying and then applying that to specific fact scenarios. I think compliance requires some of both, which is why I like it.
From a legal perspective, I find the social policy, laws, and regulations behind our compliance rules to be the most interesting part of the job. Why do we have the rule? What went wrong that led to it? Could that go wrong in my organization? I find that learning the law, identifying the reasons a law was put in place, and tracking what the SEC is doing and saying is fascinating. When I’m talking to an attorney who is looking to move into compliance, I encourage them to focus on that. Legal analysis really is a big part of the job.
On the other hand, I feel that accountants are trained to see things in terms of procedures and processes, controls and risk mitigants. That is key to a good compliance program as well. As attorneys, we have to be open to learning from our accounting colleagues and developing an approach to solving problems that may not be second nature to us.
At the end of the day, whether you approach compliance form an accounting background or a legal background (or something else entirely), you need to be flexible and willing to learn new skills. It challenges you to think about things in a way that may not be natural for you.
“I talk to a lot of people who think compliance is just about looking at expense reports or ticking and tying trades. But there’s a lot more to it. There’s legal analysis, data analytics, creating workflows and controls, and most importantly, building relationships and working with others. For the first time in my career, I can walk around at a firm party and I know everybody because I have worked with so many different people across the organization. There is an intellectual depth to compliance that I had not anticipated and the ability to build relationships across the firm is something I truly enjoy.”
How do we strike a balance between the personal and professional in compliance? How can you monitor activities without invading employees’ privacy?
Jason: It is a balance to be sure. We do require employees to preclear personal trading activity and we have insider trading protections in place. We also have our employees preclear political contributions and we require the disclosure of outside business activities that may create a conflict. So at the end of the day, we do exercise some oversight over those aspects of our employee’s lives. But I’ve found most employees understand that this is just part of working at an asset manager. For those that do feel it is an infringement of their personal freedoms, I try to explain the reasons why we have the rules and the policy objectives behind the law. They usually come around after that. I’ve found that educating folks as to the reasons we have the rules is often one of the best tools for creating a good culture of compliance.
I also try to strike a good balance between flexibility and administrative efficiency. Administratively, it may just be easier to say, “No. You can’t do this or can’t do that.” But at least at present, we are able to be a bit more flexible at times where the rules allow. That said, monitoring that administrative burden is becoming more and more important as our business grows and becomes more complex.
“We are constantly trying to find ways that technology can help create efficiencies and improve results, which is one reason we moved to Complysci.”
Can you tell us about working remotely during 2020 and returning to the office in 2021 and the compliance considerations that are involved?
Jason: The ability for different systems to speak to each other and transfer data is exciting. For example, our HR system can speak with our payroll and accounting system, which in turn can speak to Complysci. That automatic flow of information creates efficiencies and reduces the potential for human error, both of which are vital. I would like to see the development of more of those types of capabilities.
We are trying to automate as much as possible. For example, we use direct data feeds to create drafts of our SEC filings, which saves time and reduces human error. Any process that you can automate is important when you are at risk of losing personnel or simply want to move them on to higher value activities.
I know the SEC has pushed more into data analytics when it comes to looking into personal trading and insider trading issues. I would love to improve the use of data analytics in our own testing so that we can spot any potential issues first. It also represents an opportunity to do more with limited human resources. But again, that requires a little thinking outside of the box for an attorney, which goes back to my earlier point on learning new things and being flexible.
Are there any particular career highlights you’re most proud of?
Jason: One of them was improving our methodology and procedures for allocating investment opportunities across different clients within a branch of our credit business. I had to work closely with our investment and operations teams to determine what controls and procedures would allow us to actively manage our client’s portfolios to the benefit of each client while also placing controls and checks in the process to make sure each client was being treated fairly over time. To do that, I had to develop a much deeper understanding of the business. Once I understood how the various teams were thinking and operating, I was in a better position to create a process that satisfied our regulatory requirements. It was not an easy process but in the end, we created something that accomplished my compliance goals and also allowed the business to operate more efficiently.
I learned a valuable lesson from that if you can create a process that makes it easier for the business to accomplish its goals, while satisfying compliance obligations along the way, it is much more likely to be adopted and fully implemented. It’s like applying sugar coating to the outside of a pill. Fortunately, I also work in an organization that already has a good culture of compliance and makes compliance a priority so I had the support of senior management, which always helps.
“What’s most interesting about compliance is taking the regulation and figuring out how to apply it to specific business needs. Compliance works best when it is so integrated that people don’t even have to think about it.”
Last but not least, what is your guilty pleasure?
Jason: Ben & Jerry’s Milk and Cookies. I won’t buy it unless it’s for a special occasion. While I’m eating it, there comes a point in every pint where I know I should stop, and I know if I take two bites beyond that, I won’t be able to. If I pass that point of no return, the whole thing’s gone. More often than not, I take those two additional bites.
I think we all know the feeling. Thanks so much for your time.
Editorial Note: At ComplySci, we understand the tremendous value compliance professionals can gain from networking and learning directly from their peers. For the CCO Spotlight blog series, we are sitting down for candid conversations with Chief Compliance Officers from some of the firms we work with. This blog series will share those CCOs’ thoughts, ideas, and best practices for compliance programs with our readers. The views expressed in this blog post are the CCO’s own views and do not necessary reflect the views of their firms.