CCO_Spotlight_header_Valerie Pierrat

CCO Spotlight: Valerie Pierrat, Sabal Investment Advisors, LLC

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 installment of our CCO Spotlight series, ComplySci’s President, Amy Kadomatsu, interviewed Valerie Pierrat, Chief Compliance Officer for Sabal Investment Advisors, LLC (“SIA”) and its relying adviser, Sabal Investment Holdings, LLC (“SIH”). Each of SIA and SIH manage private fund assets primarily focused on commercial real estate debt with approximately $450M in assets under management. 

Amy: Welcome, Valerie! Thanks so much for joining our CCO Spotlight series! To get started, can you tell us a little bit about Sabal?

Valerie: Thanks, Amy. The Advisers are part of a larger Sabal family of companies that focus exclusively on commercial real estate debt, including servicing and securitizing commercial real estate loans. Sabal has 140 employees over 12 offices across the United States and has managed approximately $6B in assets on behalf of its clients and investors. The Funds managed by the Advisers benefit from the significant expertise of Sabal’s leadership in the commercial real estate lending, loan servicing, and asset management sectors, which provides a pipeline for the Fund’s investments.

Amy: That’s helpful, as it gives our readers some context about your role. Let’s talk about your career path to becoming a CCO. When you and I started our careers, I’m not even sure CCOs existed. Can you tell me a little bit about what your journey has looked like?

Valerie: My career began in the 1990s, and I’ve been working with institutional asset managers throughout my career. I started with Morgan Stanley in its early days of being in the mutual fund industry. At the time, the firm was tiny relative to where it is now and where the mutual fund industry is as a whole. I spent about ten years with Morgan Stanley before going to work for the Capital Group where I worked with both institutional and retail funds.

I have a diverse background that includes experience with what are now the codified compliance obligations associated with launching mutual funds and offshore products. Those early years in my career were an expansive time to be in the financial services industry and it gave me a really broad experience on a host of regulatory compliance scenarios, including both domestic and off-shore issues across a variety of investment vehicles.

The “Compliance Rule” wasn’t codified until 2003, but the advisory world was already implementing policies and procedures in the 1990s. That was very much part of the landscape when I started. I think it’s been a tremendous advantage to have “grown up” professionally with compliance even before the rules as we know them today were formalized.

Amy: The CCO role is certainly complex, as you’ve experienced. CCOs need to be able to combine compliance oversight, legal acumen, being a strategic business partner, understanding big data analytics, being a culture-carrier for the firm, and more. What are some of the attributes that have made you successful in this role?

Valerie: My experience was not a traditional career path as it would be considered today. I think that gives me a broad range of experience to draw from. When I think of important skills and attributes, there are three that come to mind right away.

First, from my perspective, it is critical to understand the business inside and out. A CCO needs to understand the sources of revenue for the firm, how that revenue is generated, who are the parties and players involved, and where potential conflicts of interest might lie. The conflicts piece is important for every firm, but it really comes into play in the mutual fund space where the firm has affiliates involved in providing distribution, broker-dealer services, and other services that may give rise to conflicts.

It is also important for a CCO to be able to communicate the rules effectively, to communicate the critical aspects of compliance. CCOs should be able to articulate the intent of a compliance rule or best practice to management without falling into a “doomsday” style of communication or overwhelming management with a level of detail that may not be necessary.

Last, but not least, when weighing a compliance issue or problem, I think it’s important to evaluate a variety of possible solutions. Consider whether you have a solution that will meet regulatory requirements but that will be relatively easy to implement and will not create an enormous compliance burden from an operations perspective. Refine your policies and procedures incrementally as you go and keep the channels of communication open as situations arise that may require additional due diligence.

Amy: Those things are so important to reiterate, because this can be an overwhelming role. Understanding the business and ensuring you’re a partner to the business are so critical to CCOs’ success. I hear that over and over again.

Valerie: It’s also how are you going to do it. It’s one thing to be a partner to the business, but it’s equally important to know your audience and understand who the stakeholders are. CCOs need to find a way to communicate effectively in plain English to the stakeholders that are most directly impacted by a compliance matter.

Amy: When you think about people who are considering careers in compliance, what should they be thinking of?

Valerie: I try to take advantage, as much as I can, of the various educational, networking, and other compliance forums available to CCOs and other regulatory compliance professionals. You can learn so much from your peers and look at the issues from various perspectives. It’s a great way to stay current on what’s important. Compliance networking wasn’t really part of the landscape when I was getting started in the profession. But anyone who is entering the compliance space today would be wise to participate in these opportunities as much as possible.

Amy: When you go to compliance conferences and read industry publications, you see and hear a lot about building a “culture of compliance.” What does that mean to you? How do you approach creating a compliant culture? 

Valerie: I think at this point, there’s a level of emotional maturity around compliance. Most people in the industry understand that compliance is simply part of the landscape. Before the adoption of the compliance rule and in the early days of its implementation, upper management in a lot of firms viewed compliance as a cost center and as something their firms reluctantly had to deal with. There were, in many firms, a lot of snide remarks about compliance. Fortunately, I don’t hear those types of remarks much anymore.

I also think management has come to recognize that certain aspects of compliance are reportable. By that, I mean that the compliance program is reportable not just to regulators, but also to current and prospective investors who have oversight responsibilities to conduct due diligence on the business before investing. Advisors generally understand this today. And, because they understand it, there’s a maturity that comes from moving compliance from being an unwelcome burden to being part of the fabric of an effective operation.

Amy: That’s such a great point, and compliance can help drive the business in that way. When you talk about prospective or current investors being concerned about compliance, that’s truly a sea change in the business. If you look at things on the horizon, what are some of the compliance trends you’re seeing or are intrigued about?

Valerie: Compliance is ever-changing. The way I look at trends is to look at what the SEC’s Office of Compliance Inspections and Examinations (OCIE) is focusing on, and why. And second, will the current examination priorities have any effect on the investment sector and on the advisers I represent as CCO?

One of the big trends I’ve seen over time is that cybersecurity continues to be a big focus for the SEC as we move toward more sophisticated automation. I need to be more sophisticated in my oversight of third-party providers, specifically the providers that handle investor information and who are also, themselves, heavily dependent on technology. I believe CCOs need to understand the extent to which providers outsource technology and focus on how policies and procedures are implemented and tested, and how the adequacy of cybersecurity efforts are assessed.

Private Fund managers will need to continue to focus on the compliance program as a whole, looking at how well the program is tailored to the scope of the advisor’s business. This is particularly true with Private Fund advisors who are vertically integrated, where conflicts of interest can become more sophisticated, more nuanced, and more difficult to avoid. The compliance program needs to ensure lines of business are adequately segregated, that conflicts are identified and disclosed, and that there is no actual or perceived impropriety.

The last thing I think about related to trends is that compliance challenges are going to come up with digital currencies and innovative types of nontraditional investment products and strategies. These areas will likely continue to be part of OCIE’s focus, although generally not relevant to Sabal’s business.

So, I look at the scope of what OCIE is looking at and ask myself where we are in this landscape and what we should be paying more attention to.

Amy: One of the questions I like to ask CCOs for this Spotlight series doesn’t necessarily relate to your role in compliance, but it can help our readers get to know you a little better. What would you say is one of your guilty pleasures?

Valerie: My guilty pleasure is that I listen to Congressional testimony. I don’t really care what it is about; I am just obsessed with the formality of the process and how information is contextualized. It’s fascinating to me to hear from people with very specific expertise, both the actual content and the intent of the discourse.

I think that’s actually something that, as a Compliance Officer, you almost have to do. When a new rule or amendment comes out, once you parse out the details, including any exemptions that might be applicable, you have to understand the intent of the rule and find a way to communicate it in a meaningful way.

Amy: One last question: Being a CCO comes with challenges. What makes that easier? How do you do it?

Valerie: My motto is to be relaxed but not casual. That means that you have an easy way of communicating issues with leadership and can raise questions without necessarily imposing action items or burdensome practices that may not be required. But you’re also documenting the analysis for any compliance issues that come up. That documentation makes everything easier; the record keeping permits you to rely on the analyses done in real time and is evidence that you have not been casual about compliance matters.

Amy: I love that motto. Thank you so much for your time!