From NCFC to Enforcement Head: Reintroducing Bill St. Louis
FINRA Enforcement works tirelessly on the front lines of investor protection, whether looking into cases of fraud or ways that bad actors try to manipulate the markets. This tremendous undertaking demands steadfast leadership.
On this episode, we are reintroduced to Bill St. Louis, the former head of FINRA’s National Cause and Financial Crimes Detection Program and FINRA's new Executive Vice President and Head of Enforcement, to learn more about the man at the helm and what's on the horizon for Enforcement in the new year.
Resources mentioned in this episode:
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00:00 - 00:27
Bill Bagley: FINRA Enforcement works tirelessly on the front lines of investor protection, whether looking into cases of fraud or ways that bad actors try to manipulate the markets. This tremendous undertaking demands steadfast leadership. On this episode of FINRA Unscripted, we meet Bill St. Louis, FINRA's new Executive Vice President and Head of Enforcement, to learn more about the man at the helm and what's on the horizon for Enforcement in this new year.
00:27 – 00:36
00:36 - 00:49
Bill Bagley: Welcome to FINRA Unscripted. I'm your host, Bill Bagley, and we have a very exciting guest here for today's episode, FINRA Executive Vice President and Head of Enforcement Bill St. Louis. Bill, welcome to the show.
00:50 - 00:52
Bill St. Louis: Hi, Bill. Nice to be here.
00:52 - 01:03
Bill Bagley: So, just to kick us off, it's a new year. You're in a new leadership role here at FINRA. I have to ask, do you have any New Year's resolutions, and if so, are they still intact?
01:03 - 01:32
Bill St. Louis: Well, I do have some resolutions. Hopefully these resolutions end up better for me than prior resolutions. I think my first one is I really want to get back to the gym in a consistent way. Like many during the pandemic, my exercise routine was interrupted, and I really want to get back into the swing of things. So, I recently joined the gym near where I live, and hopefully I will be going there in a consistent way.
01:33 - 01:35
Bill Bagley: It sounds great. I'm right there with you.
01:35 - 02:10
Bill St. Louis: I think another resolution of mine, really less of a resolution, but an imperative, is to finish meeting with everyone in Enforcement. I've met with groups, but I've also had one on one meetings with about half of the staff, and I'm really looking forward to meeting the other half of the staff on a one-on-one basis. I have to tell you, I'm really very impressed, it's a very talented group, very accomplished from diverse backgrounds, experiences. I'm really, really happy about the team that we have here at FINRA Enforcement.
02:11 - 02:26
Bill Bagley: Back in August, you were named the new Head of Enforcement at FINRA. You're no stranger to the organization or even to Enforcement. Can you tell us a little bit more about your background and the journey that led you to this role?
02:26 - 05:07
Bill St. Louis: Well, first off, one of my favorite things to watch is Between Two Ferns. So, we could call this Between Two Bills. It would be a great title if we had a recurring podcast. But in any event, I've been at FINRA for a while, the past nine years in Member Supervision in various roles. Most recently, I led the National Cause and Financial Crimes Group within Member Supervision, NCFC, as it is known, was comprised of the Cause Program, a team of investigators who do investigations triggered by terminations for cause, customer complaints, tips, arbitration filings, 4530s, etc. The National Cause Program is a key part of NCFC. Then another part of NCFC is comprised of various specialized investigative groups. They do investigations of AML issues, cyber issues, senior investor related issues, crypto. They also have a high-risk representative investigative team and a Financial Intelligence Unit. And then the third leg of NCFC was comprised of a market investigations team that did insider trading offering and fraud investigation. So, a lot of great work there, great team at NCFC. That was my most recent role prior to this promotion.
Before that, I spent much of my time in Member Supervision directly engaging with firms—small, medium, and large firms. I was a District Director in New York. I was a Regional Director for the northeast. I co-led our risk monitoring for Member Supervision. And during the latter half of that work, I also was a point person for getting Member Supervision prepared for Reg BI. But before that time in Member Supervision, I spent my first 16 years in Enforcement. I got to work on some great boiler room cases. I also got to work on, really, the first tranche of some of the important mutual fund cases. I was a Deputy Regional Chief Counsel, and towards the end of that first leg, I was the Regional Chief Counsel for the north region, where I managed Enforcement staff in New Jersey, Philadelphia, and Boston. So, this appointment is really a return home for me. Enforcement is where I started, and I'm very excited to be in the role and like I said, working with a great team on the very many important things that Enforcement works on.
05:08 - 05:13
Bill Bagley: So, Bill, did you always find yourself drawn to the world of finance?
05:13 - 08:12
Bill St. Louis: I remember my father was a social worker, and I wanted to go to law school, where I thought I was going to go into family law. But growing up in New York City allowed me to get my feet wet in the financial services industry, and I think put me on a path to FINRA, in addition to a family that really emphasized public service and public interest. I started working for a broker-dealer, a major firm, as an after-school job while in high school in Brooklyn, New York. Short train ride to Wall Street. I was a clerk at a major broker-dealer after school. And in college—I went to Baruch College here in New York City, which is really a commuter school—most of the people work while attending college, and I think leveraging that first high school experience was I able, fortunate, really, to get a job working in the compliance department of a regional broker-dealer based here in New York. I remember the chief compliance officer was a former NASD alum, and working with them in a small compliance department comprised of true compliance professionals taught me a great deal about the industry and what it meant to live—really to live—a strong compliance culture every day.
So, based on all of that and also some experiences during law school, I interned at the SEC, FINRA's mission of investor protection and market integrity definitely spoke to me and Enforcement's role in that really has spoken to me. Enforcement really are the tip of the spear for driving market integrity and investor protection, working with our colleagues here across various FINRA departments, not just Enforcement, to identify and investigate indications of misconduct, we work together to make the right calls and determine how to address the violations, be it a formal action where that's appropriate, or informal disciplinary action or no action. I think we're guided by a few light posts along that way. Number one, customer harm and restitution are paramount. My predecessors in this role have definitely spoken about the importance of restitution for Enforcement.
Also, recidivist behavior. The main approach, really, at FINRA has been one of progressive discipline—progressive when it should be progressive—but of course, even a first-time violation could be a formal action, depending on the facts and circumstances, how egregious it is, for example. But yes, recidivist behavior is another focus area. And market integrity, we've brought, and we'll continue to bring, important cases in the market area. This year, there have been a number of very important, for us, best execution and Reg SHO cases. And there are more in the pipeline for 2024.
08:13 - 08:30
Bill Bagley: That's great to hear. With all of your exposure to Enforcement leading up to this point, I'm curious if you could tell us about your leadership philosophy and how that's shifted or evolved or needing to adapt now that you're in this moment and in this role?
08:30 - 12:57
Bill St. Louis: One thing I bring to the role is I've moved around the organization, which I think has helped me get a better perspective on how the industry works. It's enabled me to understand aggravating and mitigating factors in a good way that I think will inform my approach to this present role. So, I definitely think moving around an organization makes you better. So, I feel like I'm a better regulator for having moved around a little bit within FINRA, and I definitely will bring that to my leadership of the Enforcement department, what I've learned along the way. My approach to leadership really has always been to roll up my sleeves and get to know the team that's working with me as much as I can on a personal level and learn from them what they think is working and what they think needs my attention. I think it's about the cases. So, hearing about the cases and lending my perspective where I feel it's needed is important, but also giving my team the space and room they need to work the cases, empower them, I think is important. But also listening to them and hearing about those cases many times before they're brought, so that I can lend my perspective where it's appropriate.
But that balancing, I think, is important for any leader. In any regulatory program, there's going to be a great deal of guardrails and there need to be guardrails. There are going to be levels of review and processes, etc. That's just a fact. But I think another thing that I've done in other leadership roles is take a look at those guardrails to see where some changes may make sense about empowering managers and the staff to make decisions commensurate with the facts on the ground. Developing talent has also been something that I've been really devoted to, and that's not just training on skills, etc., but also leadership skills. I myself have taken advantage of leadership training opportunities and will continue to bring that to my managers. There's always room for improvement. There's no shortage of books and courses out there that we can avail ourselves. And then also FINRA, I think, has really invested in its HR staff, which also are available to provide us with skill training and leadership training, which we will be doing here in Enforcement. I'm very big also on listening to firms and individuals.
Like I said, when I was in Risk Monitoring, I spent a lot of time engaging directly with firms of all sizes, and I imagine in Enforcement I'll be engaging with firms and individuals who work at firms of all different sizes. And I believe in giving them an opportunity to state their case and taking what we've heard from them, from actively listening to them back for appropriate consideration. So, of course, we are the Enforcement department, and there's a time for us to act, to bring cases or to decide not to bring a case. But I do think that all of that is better informed when we give people an opportunity to be heard and we actually listen. So, that's another thing that I will be bringing to the Enforcement department as a whole. And we're going to continue to focus on avoiding duplication with other regulators.
I remember a time when firms would call me or call someone on my team and say, you guys just left and the SEC, they just showed up, or some state just showed up or whatever. I think we've made a lot of progress in cutting back on that sort of duplication, but there's always room for improvement. And I say this to the industry, to the extent they're listening, that if they encounter overlapping exams that they think are duplicative, they should pick up the phone. They should call their Risk Monitoring Analyst or call the head of the exam team, or reach out to anyone at FINRA, and we will follow up on that. I think that's important that we wisely manage our finite resources, right? All of the regulators have finite resources. It only makes sense that we manage them in a way that makes the most sense. And I think duplication does not make sense.
12:58 - 13:19
Bill Bagley: Following on that theme a little bit, regulatory operations is such a major focus and component of FINRA, and Enforcement is a central feature. It would be great to hear how Enforcement interacts with those partners in regulatory operations, especially with that consideration of having finite resources and how you can capitalize on that.
13:20 - 15:10
Bill St. Louis: I think one of the smartest things that we're doing at FINRA these days is really focusing on regulatory operations, how the regulatory operations functions work with each other, how we share information, avoiding silos, making sure that we communicate, etc. And I think that, to start, we're already doing a great job in that regard. But this work that we're doing is really around enhancing what's working even more. At the leadership level, Greg Ruppert from Member Supervision and Stephanie Dumont from Market Regulation Transparency Services, and I, we meet all the time. We're talking, we're sharing notes, we're talking about our priorities, what we're focused on and also, we're talking about opportunities to improve how we communicate and how we're integrated.
Enforcement, we're at the end of the process. A lot of our referrals come from Member Supervision and Market Regulation, but we're also not at the end of the process, in part because of this initiative and the work that's been done on regulatory operations. Our teams talk to each other almost throughout the life cycle of an exam or an investigation. There's a lot of interim communication. It's almost never the case that the referral that's come over is the first time we've heard about a matter. And that's only going to lead to a faster resolution of the matter. And I think that's in everyone's interest. It's certainly in the industry's interests and it's certainly in our interest. So, I think reg ops is very, very promising. And it may sound like something internal at FINRA that has no impact on member firms and associated people, but it does, and it will lead to more efficient, smarter regulation.
15:12 - 15:22
Bill Bagley: It was a busy 2023. Are there any major moments or wins for Enforcement from 2023 from your perspective that really stood out?
15:23 - 17:29
Bill St. Louis: Our mission here in Enforcement is really to act quickly to remove bad actors from the industry, to obtain restitution for harmed customers, to seek sanctions that are fair, effective and proportionate to the harm or risk posed by the misconduct, and also to seek opportunities to have existing investigations expanded where appropriate. Expanded to explore whether harm has occurred to other customers, whether the violations have occurred on a wider scale, including maybe by other brokers at the firm or at other firms. And just starting there and looking at 2023, I think that a great job in 2023 meeting and exceeding some of our goals here. So, we've brought some very interesting regulation best interest, Reg BI cases. There have been firms that have been expelled in part because of Reg BI findings, typically involving customer harm. We've brought important cases involving senior investors, which is always a focus for us.
We've also brought an important case involving Gold Star families who were the victims of misconduct by brokers. We've brought important best execution cases and Reg SHO cases. We recently issued a press release around a significant Treasury spoofing case and a failure to supervise that activity, and we've been able to obtain large, large amounts of restitution in actions ranging all the way down to small amounts of restitution. It may look small, but it's impactful for that, perhaps, one investor who received that restitution. So, restitution is critically important and is really the main metric. And also, that compliance cultures need to improve such that hopefully the amount of restitution we get year over year goes down.
17:29 - 17:38
Bill Bagley: If you could, tell us a little bit about some of the key priorities that Enforcement is going to focus on as the new year gets underway.
17:39 - 20:20
Bill St. Louis: I really encourage all of the listeners to take a look at FINRA's Annual Report on its oversight activities, which will highlight a lot of the things that we found in 2023, and some of the areas that will again be of focus in 2024. So, regulation best interest is going to continue to be a priority area for us. We have brought a number of cases involving the duty of care, excessive trading cases, cases involving products that were perhaps over concentrated or products that were recommended to investors. But the brokers really didn't understand key aspects of the product, which led to investor harm. And there are a number of cases in the pipeline focused on the duty of care. We also have brought and have other cases focused on other obligations of regulation best interest. We have compliance obligation cases. We have disclosure obligation cases. An example, cases involving failures to disclose certain conflicts, for example, that people at the firm were being compensated by an issuer or people at the firm had a financial interest in an issuer that was perhaps like a private placement being conducted by the firm. So, Reg BI will continue to be a focus.
It'll also be a focus in our continuing look at complex products, how they're recommended, regulation best interest, and also how they're marketed. We have rules around advertising and making sure the communications are not misleading, etc. That will continue to be a focus. Also, like I mentioned earlier, our work on certain market associated rules will continue. Best execution, Reg SHO, spoofing cases that occurred and failures to properly supervise for spoofing. In addition, AML will continue to be a focus as well. One thing that I'm focused on is I've heard from firms around instances where they may get a phone call from Enforcement in a January saying, 'hey, this case is with Enforcement, we'll be in touch.' And then the next time they hear from Enforcement may be months later, maybe to resolve the case. So, one of the things that I want to drive is not only faster resolutions, but more consistently communicating with firms, periodic check ins to let firms know about the status of a matter so that we don't have long gaps of silence. So, that's going to be another focus area.
20:19 - 20:35
Bill Bagley: That's great to hear. Yeah, communications is going to be key. And outside of the 2024 FINRA Regulatory Oversight Report, if priorities shift over the year, if there are other issues that come up, how might that get communicated to firms from the Enforcement team?
20:35 - 21:36
Bill St. Louis: We were talking about regulatory operations earlier. We get together oftentimes with Member Supervision and Market Regulation and other departments at FINRA. When we see an issue, maybe it's the first time we've seen the issue, some nuance of the issue, the first time we're seeing it, and we engage in a lot of conversation around, should we issue a guidance? Should we issue an alert? Should we convene a group of firms who maybe have some touch point to the issue, get their perspective on the issue? So, as things develop, I think FINRA has done a very good job of providing guidance and notice and alerts to the industry—that's going to continue in 2024. It's something that we are committed to doing, in addition to bringing formal actions and bringing cases. So, I think there's a range of options that are before us, but we take seriously the need to inform the industry, particularly around unique issues.
21:37 - 21:50
Bill Bagley: And before we wrap up, I think that we've covered a lot of ground here and this has been absolutely fascinating. I wanted to ask if there's anything more you'd like to share, observations or otherwise, as you've taken on this new role.
21:51 - 23:34
Bill St. Louis: I think that the Enforcement department is comprised of a team of professional investigators, analysts, data analysts, attorneys, operations staff. We really are a pretty accomplished group who really want to get to the right answer. And the right answer is often a formal action, and it's often not a formal action. It's amazing the percentage of cases that we have on our docket that don't result in formal action. We issue cautionary action in formal discipline. We decide to bring no formal action. We've also brought cases with an AWC where there's no fine, for example, recognizing the remedial steps taken by firms, or other steps taken by firms, that lead us to decide that there's not a need for a fine, for example. Many of those cases involve restitution, where restitution was paid in an efficient manner. So, we really are focused on getting to the right answer. We're going to continue to be focused on getting to the right answer. We are open to dialogue, to listening.
Reach out to the director or the chief counsel on the case and start that process. If you want to make sure that you're heard, we are here to listen. We also, I think, are very much focused on working better with our referral partners to make sure that we're identifying misconduct and also identifying instances where guidance should be issued like I said earlier. I think that there's going to be a great year for the Enforcement department and we're raring to get going.
23:35 - 24:00
Bill Bagley: That's great to hear. I think everyone's very excited to get to work. And finally, you've had this amazing journey to this point, and it's grounded in purpose and the determination to do the right thing. For somebody who's out there listening and may want to pursue a career in Enforcement or get involved with FINRA, do you have any advice that you would offer to someone listening out there?
24:01 - 25:43
Bill St. Louis: I wish there was an SIE exam back when I was in college or a young college graduate. I think that's a great way to start to learn about the industry. That's the Securities Industry Essentials examination. I definitely encourage people to consider that examination. I remember one of my favorite courses in law school was securities regulation. And now of course, today, a lot of colleges have opportunities for you to do an extended focus on compliance, the regulatory landscape, not only in this industry but in other industries as well. So, I think that there are avenues in academia for people interested in getting into regulation and into compliance.
I also think some of our issued disciplinary actions reports summarized on a monthly basis are excellent reading to learn more about what we in Enforcement do and the kind of issues that we're facing. And many a compliance officer has told me that they're a great tool for the compliance world as well, because they're circulated as 'don't let this be you,' kind of communications. FINRA really does a lot of work in the Investor Education space. Our website is really a treasure trove for people who want to learn about investing and also learn more about FINRA. So, I would suggest that people take a look at that as well. And FINRA is an active employer looking to hire great talent in Member Supervision, Dispute Resolution, all the FINRA departments. So, I encourage people to take a look at that. And it's a great way to get into the financial services industry from the compliance and legal perspective.
25:43 - 26:09
Bill Bagley: Bill, thank you so much for joining us and for this incredible overview of Enforcement and all of your insights. Most importantly, congratulations on your new role. That's it for today's episode of FINRA Unscripted. Listeners, if you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. Today's episode was produced by me, Bill Bagley, engineered by John Williams and coordinated by Hannah Krobock. Until next time.
26:09 – 26:15
26:15 - 26:42
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