Transcript
Speaker: Welcome to Synergize. I'm Bill Capelle, Director of Client Growth at Trade PMR by Robinhood. And I'm Ryan Neal, Editorial Manager at Trade PMR by Robinhood. And welcome to our Synergy Summer Series. We're taping these from the conference floor at Synergy 26 in Washington, DC. That's right, Ryan. We're live here in Washington, DC.
Speaker: And all summer long, we're going to be sharing plenty of insights and actionable by ideas that you can use to build your business. So let's get into the episode. And welcome back to the Synergize podcast. We're coming to you from Synergy 26 conference floor in Washington, D.C. We've got a busy day ahead of us, but right before he goes on stage, we got a chance to sit down with Dan Gallagher. He's Robin Hood's chief legal compliance and corporate affairs officer. Did I get that all right? You got it. Oh, fantastic. He's about to go on stage and set the agenda for us, but he's joining the podcast again. He was here last year. So, Dan, welcome back to the show. Thanks for having me again. I guess I did okay last time. Absolutely. You made it easy for me this year. You made it in D.C. where I'm based for Robin Hood. We do what we can. Yeah, I appreciate that. That's right. And particularly with your schedule, you're spending a lot of time here. You know, when you joined us last year at this conference, Dan, you kind of projected out what we can anticipate in terms
Speaker: of the regulatory environment ahead of us, particularly as it relates to the SEC. And you said an intense regulatory environment across the board for all financial services, lots of investigations, a lot of enforcement.
Speaker: What do you see going forward over the next 12 months? Yeah, so I think last year when we were sitting, not here literally, but together, we were reflecting on 2024. And, you know, it being a presidential election year, it being the last year, it turns out of the Biden administration, I think we saw an intense, as I said, environment of regulatory enforcement, rulemaking, just a lot of regulation generally.
Speaker: When we sat together last year, we were kind of just getting into the new administration. Paul Atkins had been named as SEC chair. There were other changes at other regulatory agencies. And i think what we saw last year was a lot of stage setting for what will be an equally intense regulatory environment, but a more proactively intense environment.
Speaker: less less regulatory, some easing of regulations that are either outdated, overly burdensome, and And very importantly, an easing of the regulatory and enforcement environment that was just, quite frankly, very oppressive under the last administration.
Speaker: And no compromise on protecting investors, but at the same time, is it more towards trying to make it little less onerous to even do business? It's funny, you know, and you know having been on the commission as an SEC commissioner, when you take that oath,
Speaker: you know, to fulfill your duties of office. At the SEC, you're saying, I'm going to protect investors. It's quite literally part of the statutory mandate for the SEC. So the idea that any chairman, any commission would engage in activities that that undermine investors, I think is silly. You hear that a lot when you hear deregulation. There's always a fear of, you know, less regulation means more harm to investors. And quite frankly, oftentimes it's the exact opposite. it means more choice, more innovation, lower fees, more competition. um
Speaker: So I think that's what we've been seeing. i think Chair Atkins over 2025 has already started to put in place ah regime where there is enhanced competition, where the really burdensome, unnecessary regulations are being revisited.
Speaker: And we're going to start seeing more and more of that activity this year. Just better alignment all around. Better alignment, better. And, you know, probably the number one thing is they're listening. Right. And this is what I would say to you know anyone listening to the the podcast. If you're an advisor, a broker, it doesn't matter. that They're open for business, which, I mean, try in the last administration to get a meeting with the SEC chair. It was he was never here.
Speaker: in DC. um you know So unless you were on Zoom, you couldn't do it. And then even then they weren't taking meetings the way that this administration is, this FINRA is, the CFTC. it's They're listening to folks. They're soliciting comment on things before they start rulemaking, which is very a very different posture than what we saw before.
Speaker: so i think you So I think you were just kind of touching on this, but any other of the shifts or reversals in policies that you think are extra impactful to financial advisors in their business? well So i already mentioned enforcement. I think just the the taking the pressure out of the enforcement environment, being able to do your job without the constant fear of a subpoena or a testimony or a regulatory enforcement action.
Speaker: They're going to be there. They're policing the markets. They're watching. They're examining. But it's not going to be this same sort of standard of you know every little tiny potential infraction gets brought as a big case, these sweeps and other things, the the books and records cases in particular, right? Are you keeping text messages and all these other things? So you're seeing a real shift away from that.
Speaker: And then I think on the positive proactive side, maybe most impactful for advisors would be e-delivery. You're gonna see you know some rulemaking there, some accommodation for basically the modern way that advisors communicate with customers, the way that customers, investors receive communications these days. And you know we can say this from the Robinhood perspective,
Speaker: Oftentimes it's through your phone. it's It's not through the mail. It's not even an email. Sometimes it's through an app. So the SEC and FINRA, I know for sure, are listening to the concerns of brokers, advisors, and they're going to revisit those rules, which I think is pretty exciting. Yeah, particularly in light of cybersecurity, which is a top of mind of everyone today.
Speaker: How do you see that that alignment, which we mentioned earlier? And this is how I interpret what you just said, which is, Part of it is to get the process more aligned with how people do business in just about every other way. yeah um You see more assistance coming out of the SEC and trying to make that happen? I do. i absolutely do. And if you think about it, right, the statute that governs the advisor industry is literally from 1940. Right, right. Investment Advisors Act of 1940. So, and here we are, it's 2026. We're coming up on that 100-year anniversary.
Speaker: The law, it's been amended a little over time, but it still basically speaks to ah a model of human interaction and paper and bricks and mortar. And that's just not how folks do things. And we know this, you guys know this at Robinhood, you know, the customers are younger. Right. And they just take information, they want information in different formats than customers, investors a hundred years ago did.
Speaker: Exactly. Exactly. And the regulators are listening. i think they're finally trying to understand modern markets. If you if you look at the last SEC, the Gensler SEC, they actually floated a rule proposal on the use of technology in the provision of financial services to retail.
Speaker: And it was it was advisory, it was brokerage. yeah And it basically said you can't use technology. It would have prescribed 90% of the technological tools that are used today, all in chase of this idea that investors are being harmed by by these evil financial firms who are trying to spin data, spin technology to get them to make bad choices. and False premise. The rule never went anywhere. But that's how stark a difference we have today. we We have prior administration doing that, the current administration thinking about, can I shoot you an in-app message with an important disclosure for you, and can that satisfy the disclosure requirements of the federal securities lawsuit? And there's got to be an expectation of, of we want things sooner than later. you know That's the big benefit of technology. It makes it easier, or removes complexity, removes friction.
Speaker: Right. Well, let me ask you, there anything that RAs should be mindful about now that the SEC is keeping a closer eye on? Yeah, I mean, look, the the basics are always there, right? You have a fiduciary duty. Right. You know, make sure you you fulfill it Supervise your business. Make sure you have the policies and procedures. Have a strong compliance function. Those things don't change at all. So if I was giving...
Speaker: really actionable advice to advisors it it wouldn't be change anything of these these the basics that you're doing right it would be get in you know talk to the sec uh talk to your trade groups you know there's there's various trade groups uh that folks are involved with get these changes made to the rules soon so that you can live through a a couple compliance cycles with them. Usually when you change a rule and the industry has to go through a couple compliance cycles, annual cycles or semi-annual, it just bakes in the changes. They're not subject to rescission or major amendment in the next administration, which is becoming, by the way, more and more common.
Speaker: You're seeing yeah every four to eight years big changes, and I don't advocate that either way. I kind of like the one we're in right now, but... Either way, those swings are not healthy for our capital markets and it's becoming more and more common. But we're in an environment now where you can make a difference if you let your voice be heard. And that that would be my advice to to anyone listening.
Speaker: So speak up. Speak up. Be engaged. Be engaged and don't assume that that your firm's idiosyncratic issues are understood by the regulator. Because they're going to look at a homogenized comment letter from a trade group. They're going to hear macro themes about concerns, but that they might not always be consistent with your firm structure, your your customer base.
Speaker: So make sure your voice is heard so that, you know, to the extent that there are regulatory changes, they can help your business model also. Great. Well, you anticipated our last question because we we like to wrap up the podcast with that one actual piece of advice, but think we just heard it, right? Make your voice heard. Make your voice heard. and and be out And be out there. So, Dan, we know you've got to run. You're going to be on stage pretty soon. Yes, sir. So, thank you so much for stopping by the the podcast. Thanks for having me, guys. great Always a pleasure, sir. Take care. Thank you.
