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.
For this first installment of our CCO Spotlight series, ComplySci’s COO, Amy Kadomatsu, interviewed John McGuinness, Chief Compliance Officer and Corporate Counsel for StepStone Group (Stepstone), a global private markets firm with more than $270 billion in capital allocations, including more than $54 billion in assets under management.
Amy: You currently serve as Chief Compliance Officer and Corporate Counsel for StepStone Group. What was your career path to becoming a CCO?
John: I started my career as a “big law” attorney as an associate with Fried, Frank, Harris, Shriver & Jacobson, where I worked on a variety of matters, ranging from general corporate work, litigation and restructuring, to private equity deals and fund formation work. I was part of the Asset Management practice group for most of my time at the firm. I was very fortunate to work with such an amazingly talented group of lawyers at Fried, Frank. From there, I moved to the Investment Management Group at Linklaters LLP, working primarily with investment management sponsors on private fund-related activities. I then moved in-house, joining the Goldman Sachs Asset Management team as a vice president and compliance officer for the firm’s private equity investment platform and its long/short multi-strategy hedge funds. I’ve been very happy in my current role with StepStone since March 2015.
Spending the early years of my career as a corporate lawyer in the asset management and investment space really helped me see and understand my clients’ businesses in ways that were very enlightening, and helped lead me to my current career path.
Amy: As you’ve grown as a CCO, how have you adapted? What’s your superpower?
John: In my opinion, the most important thing a new CCO can do is to learn the business lines they are covering inside and out. Understanding the inner workings of various departments in their firms helps CCOs proactively identify risks, in turn helping them better understand how to address those risks.
If I have some kind of a superpower, I guess it would have to be a combination of good judgment and work ethic. Nothing too exciting!
Amy: The role of the CCO has evolved to include oversight, strategic business partner, big data analytics, and being a culture carrier for the firm. How do you think about these? How have you balanced these?
John: The CCO role really requires adaptability and flexibility. I work hard to maintain close business relationships with various groups at StepStone, and I strive to truly understand each group’s needs and the issues they face. I also believe it’s important to be out on the floor, to be visible and approachable.
Amy: What is something you’ve done to create a “culture of compliance” in your organization?
John: I was fortunate enough to land at a firm where a strong compliance culture has been part of the fabric of the firm since day one. Two of StepStone’s founders began their careers as corporate attorneys, and the third was a naval aviator before he joined the investment world. So, there was already an intrinsic respect for compliance rules, processes and procedures in place when I arrived. Our Compliance team continues to be involved in all aspects of StepStone’s strategy and planning, and our team is viewed as a valuable asset to the firm.
My immediate predecessor in the CCO role, Jason Ment, recently became President and Co-COO of the firm, which is further evidence of our team’s internal value. I continue to do my best to carry the strong culture I inherited, making sure to keep an open-door policy and interact with all our business and operational teams. Keeping the door open to internal communication has really helped foster our Culture of Compliance.
Amy: What is a new role on your team that didn’t exist five years ago?
John: We’ve seen a lot of internal growth at StepStone over the last several years. As we’ve grown, we’ve gained exposure to new markets outside the U.S. Because of that, we’ve gained compliance offices in new locations and strengthened our team with talented local compliance officers in those locations.
As far as career path changes, I think technological aspects are already providing, and will continue to provide, a lot of new opportunities and roles for compliance professionals.
Amy: What are some of the biggest trends you see in compliance today?
John: The increase in AML and KYC scrutiny across jurisdictions and tighter data privacy and protection regulations are already contributing to an increased, and more expansive, role for compliance professionals. Whether it is GDPR, California’s Consumer Privacy Act or new and proposed legislation in Nevada, New York, and other states, there will continue to be growing demands on compliance departments in relation to these new regulatory efforts.
Much more so than in years past, technology is driving the ways asset managers address their procedures, providing a more comprehensive picture for compliance purposes.
Organizations that embrace a culture of compliance will likely benefit more than other organizations as these trends continue. Firms that make sure compliance has a seat at the main table will be more likely to succeed going forward. Organizations that view compliance as an afterthought or a roadblock will suffer mightily in the evolving compliance landscape.
Amy: Tell me about what you see as the biggest challenges CCOs face.
John: The changing nature of the role provides a lot of terrific opportunities; there is no denying the importance of the compliance function in today’s regulatory environment. That continued evolution may force CCOs into new—and sometimes uncomfortable—areas.
The CCOs of the future and their teams will need to be more technologically adept, and will need to be comfortable with leveraging new technologies to approach regulatory changes and risk. Regulatory progress is going to continue to impact the industry. Being in a position where there is internal buy-in to drive change will be key for tomorrow’s CCOs.
Amy: 2020 is right around the corner. Do you have any predictions for the coming year?
John: As a rule, I am loathe to provide forward-looking statements. That said, I believe it is safe to say that many new regulatory developments will have an impact on legal and compliance professionals. Things like CCPA, UK SMCR, and Brexit will impact the majority of asset managers.
Amy: What is the next innovation you see coming to compliance?
John:I think it’s already here to some degree. I believe innovations in technology like AI, machine learning, and predictive capabilities are going to provide a lot of new and interesting roles and opportunities for compliance professionals moving forward—opportunities that simply aren’t on the table yet today.
Amy: Thank you so much for taking the time to talk to me today, John. Before we end this interview, I have to ask you one last question: What is your guilty pleasure?
John: Fortunately, there’s not too much guilt involved in my free time activities. I do my best to stay involved in my kids’ activities and give them support each step of the way. Whether that’s coaching my sons’ basketball or baseball teams, rooting my daughter’s lacrosse team on from the sidelines, or taking in a band or theater club performance, you will find me and my wife spending any time we can with them.
If you’re looking for a truly guilty pleasure, I have been toiling, without much progress, as a truly amateur guitarist for more time than I care to admit. Aside from that, I still like to keep up on the pleasure reading front. I actually just finished two really interesting books: Dreamland: The True Tale of America’s Opiate Epidemic by Sam Quinones and The Road to Jonestown: Jim Jones and Peoples Temple by Jeff Guinn. Both were written by investigative journalists, each covering a harrowing and notable subject. They were fantastic reads, but I think I need to find something just a bit lighter for my next book.