Certified Regulatory and Compliance Professional (CRCP) Lunch Monday, May 21 12:15 p.m. 1:15 p.m.

Transcription

1 Certified Regulatory and Compliance Professional (CRCP) Lunch Monday, May 21 12:15 p.m. 1:15 p.m. Speakers: Patricia Albrecht Senior Director FINRA Member Relations and Education James Angel Professor, McDonough School of Business Georgetown University 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

2 Certified Regulatory and Compliance Professional (CRCP) Lunch Panelist Bios: Speakers: Patricia Albrecht is a senior director with FINRA s Member Relations and Education Department and manages the FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP) program and FINRA s Half-Day Compliance Boot Camp program. Previously, she was an associate general counsel in FINRA s Office of General Counsel, and served in the same role at NASD before its 2007 consolidation with NYSE Member Regulation, which resulted in the formation of FINRA. She also has worked at the U.S. Securities and Exchange Commission in various offices and departments, including the Office of General Counsel and the Division of Trading and Markets, and serving as a counselor to Commissioner Norman Johnson. In addition, Ms. Albrecht worked for several years as a staff attorney at the U.S. Federal Fifth Circuit Court of Appeals and completed a federal judicial clerkship with U.S. District Court Judge Harry Lee Hudspeth. James Angel is an associate professor of finance at the McDonough School of Business at Georgetown University who specializes in financial market structure. His interests include fintech, cryptocurrencies, and payments. He has visited more than 70 stock and commodities exchanges around the world in his quest to learn the details of how markets really operate. Professor Angel has served as a Visiting Academic Fellow in residence at the National Association of Securities Dealers (NASD now FINRA) and also as a visiting economist at the Shanghai Stock Exchange. He served as chairman of the Nasdaq Economic Advisory Board and later on the board of directors of the Direct Edge stock exchanges prior to their acquisition by BATS Global Markets. He is now the Academic Director of the FINRA CRCP program. Professor Angel is a co-inventor on 12 fintech patents. He has testified six times before Congress about issues relating to the design of financial markets. In addition, he has been quoted in thousands of media articles and has appeared numerous times on radio and television. He began his professional career as a rate engineer at Pacific Gas and Electric, where he worked on FERC and CPUC related issues in electricity regulation. After earning his MBA at Harvard, he worked at BARRA (later part of Morgan Stanley) where he developed transactions cost prediction and equity risk models used in portfolio management. Professor Angel earned his B.S. from the California Institute of Technology, his MBA from Harvard Business School, and his Ph.D. from the University of California at Berkeley. He has been a professor at Georgetown University since From 2012 to 2014 he was a visiting associate professor at the Wharton School of the University of Pennsylvania. The courses he has taught include Capital Markets, World Equity Markets, Investments, as well as Complex Financial Instruments and Derivatives Financial Industry Regulatory Authority, Inc. All rights reserved. 2

3 2018 FINRA Annual Conference May 21 23, 2018 Washington, DC Certified Regulatory and Compliance Professional (CRCP) Lunch

4 Panelists Speakers Patricia Albrecht, Senior Director, FINRA Member Relations and Education James Angel, Professor, McDonough School of Business, Georgetown University FINRA Annual Conference 2018 FINRA. All rights reserved. 1

5 ICOs from the South Seas to Today James J. Angel, Ph.D., CFA

6 About Dr. Jim, CFA I study financial market structure. Includes financial market infrastructure (plumbing) Federal Reserve s Faster Payments Task Force 12 patents on financial technology Testified 6 times before Congress Visited ~ 70 stock exchanges around the world. Work experience: PGandE, BARRA (later part of Morgan Stanley), Nasdaq, Shanghai Stock Exchange Board of Directors: DirectEdge Stock Exchange BS Caltech, MBA Harvard Business School, Ph.D. U.C. Berkeley At Georgetown +/- since 1991 Wharton ( ) 3

7 Coming soon! FINRA CRCP Program at Georgetown 5/17/2018 4

8 Financial Technology Revolution Wealth management Robos Lending Peer-to-peer lending Trading AI,HFT Capital raising Crowdfunding ICOs Payments Faster payments Cryptos? 5/17/2018 5

9 But what will the result of the revolution be? OR?? 5/17/2018 6

10 WE VE SEEN THIS BEFORE 5/17/2018 7

11 History doesn t repeat, but it sure does rhyme. Once upon a time Joint stock companies were formed Usually required royal charters 1600 East India Company 1602 Dutch East India Company 1720 Mississippi Company (France) Spectacular bubble! South Sea Company (UK) Took on UK debt Granted monopoly on trade with South Seas. 5/17/2018 8

12 The South Sea Bubble Companies The success of the South Sea Company spawned dozens of new ventures. Speculative frenzy Some plausible More making of iron and steel For purchasing lands to build on For supplying the town of Deal with fresh water 5/17/2018 9

13 Some not so plausible For a wheel of perpetual motion For extracting silver from lead A gun with square bullets 5/17/

14 Even a blind check SPAC A company for taking on an undertaking of great advantage; but nobody to know what it is Turned out to be a scam. 5/17/

15 Government response: Ban them all! June 1720: Ban joint stock companies! (An Act for better securing certain Powers and Privileges intended to be granted by His Majesty by Two Charters for Assurance of Ships and Merchandizes at Sea, and for lending Money on Bottomry; and for restraining several extravagant and unwarrantable Practices therein mentioned, 6 Geo I, c. 18) Ban lasted until 1825! However, joint stock companies are extremely useful devices for mobilizing and allocating capital for investments. We eventually evolved regulatory schemes. 5/17/

16 ICOs and corporate finance Traditional funding of new businesses: Angel funding to get started Rounds of venture capital to grow Exit by selling to other business or going public ICOs Create instantly liquid angel/venture capital! Using modern communication methods Innovation in corporate finance? Or innovation in fraud? Have surpassed traditional VC in Regulatory issues: Financial markets are highly regulated, and for good reason. Most ICOs will be regulated by somebody. Question is who and how. 5/17/

17 US Regulatory response?? Why aren t you stopping all the ICOs which are clearly unregulated investments? Hearing entitled Oversight of the SEC s Division of Corporation Finance Thursday, April 26, /17/

18 So where are we going??? ICOs are a technical advance in capital formation. Current implementations marred by widespread fraud. They will be regulated in some way. A complete ban does not make sense. Need fresh thinking on regulation Think outside the 33 Act box How this regulation will take place remains to be seen. What will it look like a century from now? 5/17/

19 Gilbert and Sullivan s Utopia, LTD Let's seal this mercantile pact-- The step we ne'er shall rue-- It gives whatever we lacked The statement's strictly true. All hail, astonishing Fact! All hail, Invention new The Joint Stock Company's Act-- The Act of Sixty-Two! AT 17:00 5/17/