From NCFC to Member Supervision Head: Reintroducing Greg Ruppert

Greg Ruppert joined FINRA in 2020 to form and lead the National Cause and Financial Crimes Detection Programs. Now, he’s been tapped to lead Member Supervision, the team responsible for the surveillance and examination of FINRA member firms and for detecting and deterring activities that can cause investor harm.

On this episode, we talk to Greg about how he views this transition in leadership and his goals and areas of focus in his new role. 

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Resources mentioned in this episode:

2022 Report on FINRA's Examination and Risk Monitoring Program

Episode 60: Introducing Greg Ruppert and the National Cause and Financial Crimes Detection Programs

Episode 86: FINRA’s Financial Intelligence Unit: Connecting the Dots

2021 Report on FINRA’s Examination and Risk Monitoring Program

PLI Podcast: Focus on FINRA Enforcement with Jessica Hopper

FINRA’s Upcoming Conferences and Events

Listen and subscribe to our podcast on Apple Podcasts, Google Podcasts, Spotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 

FULL TRANSCRIPT 

00:00 – 00:24

Kaitlyn Kiernan: Greg Ruppert joined FINRA in 2020 to form and lead the National Cause and Financial Crimes Detection Programs. Now he's been tapped to lead Member Supervision, the team responsible for the surveillance and examination of FINRA member firms and for detecting and deterring activities that can cause investor harm. On this episode, we talked to Greg about how he views this transition in leadership and his goals and priorities in his new role.

00:24 – 00:34

Intro Music

00:34 – 00:50

Kaitlyn Kiernan: Welcome to FINRA Unscripted, I'm your host, Kaitlyn Kiernan. Today, we are welcoming back to the show an old favorite guest with a new title. Joining us is Greg Ruppert, who became FINRA's head of Members Supervision in November of 2021. Greg, welcome back to the show and congrats on the new role.

00:51 – 00:53

Greg Ruppert: Thank you and thank you for having me back.

00:53 - 01:03

Kaitlyn Kiernan: So, you joined FINRA just about two years ago in March of 2020 - the very early days of the pandemic. And it's been a whirlwind two years, hasn't it?

01:03 - 01:04

Greg Ruppert: It has.

01:04 - 01:18

Kaitlyn Kiernan: We did a deep dive into your background when you first joined FINRA back on episode 60, which we'll link to for anyone who missed it, but at a high level, can you tell our listeners what brought you to FINRA and this point in your career?

01:18 - 01:46

Greg Ruppert: Even in my first role and now this role, it's about the mission. It's about an opportunity to protect investors and safeguard the market integrity, which is something very early on in my career, right after law school, I embarked on a career to pursuing. And it was just so great to have the opportunity to come back to that larger mission. And it's something that really motivates me and excites me and gets me up every day to do the best work we possibly can directly impacting investor protection.

01:47 - 01:51

Kaitlyn Kiernan: And how has some of your previous experience prepared you for this role now?

01:52 - 04:56

Greg Ruppert: Each step of the way in my career, whether it's working in the government or working for a member firm, has just expanded my awareness of the complexity of the atmosphere, the complexity of the work that we need to do, the experience that we need to have, as well as the feedback and engagement and collaboration with so many other groups.

So, if I think back, coming from government, I used to do a lot of post-event, after the incident, after something blows up investigations, where we were able to do a very narrow, deep dive, whether it's an individual issue, a criminal conspiracy or criminal group or an area in the business where they had a particular bad actor. Going to a firm and seeing it from the firm perspective put a whole different light on the need to be able to cover a lot more ground and operationalize a compliance and a risk mindset to looking across all areas of operation. Not any one particular issue to protect the clients at that time, as well as protect the firm itself and then expand into how do you build a program that is reasonably designed that looks at an outside threat? So not just internally what's happening, but you're also impacted externally for threat actors. So, from those perspectives, it just has a different lens that you have to put on. I think I take both of those experiences.

Plus, a little bit on the member firm side, I was fortunate enough to be in a member firm that had a large custody platform that serviced a large number of RIAs, and that was a completely different experience of providing compliance oversight for RIA firms, which were just much smaller in scale and coverage. So, from that standpoint, seeing how a small business needs to operate in this space also gave me an additional perspective of carrying forward of how to engage and how to promote the compliance and risk mindset, not through merely just oversight and investigations, but providing content and materials and intelligence to arm them before something happens.

So, all three of those lenses bringing those to FINRA is something that's been very helpful for me. So, I look at how we do things from Member Supervision, not only in our regulatory oversight area in terms of the responsibility we have in oversighting member firms. But also, are there areas that we could take our expertise, our intelligence and inform member firms before something happens? So, to that left of boom or left of the event happening, so that they're more prepared for that and we can collaborate together in a one team mindset and then leverage our unique intersection between member firms and investors and inform other regulators, as well as law enforcement, when we need additional support in this area.

So, all of those areas, I think, come to a confluence here for me at FINRA, and it's just a great opportunity to be here, and it's a great opportunity to be at this point in FINRA's timeline of evolution that makes it really exciting.

04:57 - 05:17

Kaitlyn Kiernan: Yeah, diversity of experience definitely sounds helpful with such a large and complex team. Bari Havlik hired you, our departing head of Member Supervision, and you guys worked very closely together over the past two years while you were head of the National Cause and Financial Crimes Detection Program. How should firms view this change in leadership?

05:18 - 06:14

Greg Ruppert: We go even further back. We actually worked together, and I worked for her in one of our member firms dating back as far as 2014. So, you can say part of the reason I'm also here at FINRA is because of following Bari's leadership. But I also really liked the transformation that Member Supervision embarked on a few years ago, and I was at a member firm at the time. I was also on a membership committee for FINRA and saw firsthand the start, as well as the evolution, of that transformation. And I really thought it was a beneficial approach to addressing firms in particular firm groupings rather than the regional model. And I've been excited to see it not only from the outside, but now from the inside and to continue on that evolution.

I would say the message to member firms is they're going to see a similar approach that I have that Bari had, as well as our desire to stay consistent with the transformation and where that transformation is headed.

06:15 - 06:23

Kaitlyn Kiernan: I know that transformation has been a very large undertaking, so it looks like the future of the transformation is still moving forward.

06:24 - 07:13

Greg Ruppert: Correct. Yes. There's always going to be iterative approaches that we're addressing for either efficiency or effectiveness. But I think that the massive undertaking that we did back a few years ago definitely gave us the foundation of, or platform of which to move forward. And so, from that, I would expect very little visibility from a member firm perspective of the changes.

A lot of the changes that we're going to be doing internally are going to be centered around technology, data analytics, increasing our level of cross-focus expertise through the Risk Monitoring, the Exam and the NCFC teams, as well as a number of other areas. And just really bringing again a one team, one fight approach to how we look at not only regulation, but also informing and educating not only our members, but the investors that are under our authority to protect.

07:14 - 07:22

Kaitlyn Kiernan: So, what are your areas of focus for Members Supervision as a whole, both for the year ahead and for the longer term? But maybe let's start with the year ahead.

07:23 - 09:49

Greg Ruppert: I'm looking at it in two distinct areas. One is internal and the other is external. Internally, one of our areas is going to be technology. And included in technology under my definition for the teams is also going to be data analytics, which is an area that FINRA has been investing and focused on starting last year and will continue into this year.

Another area is really connecting the teams together where we have our groups of Risk Monitoring, Firm Exams as well as my old team, the National Cause and Financial Crimes area. We have a number of other groups that are also integral but making sure that they're operating under a common vision and a common purpose that will feed into our ability to address issues and trends, as well as items that we prioritize externally, and I'll talk about in a second. But as a single unifying structure. And then another area that's going to be key to this is going to be the internal focus on development of our staff. So, everything from the integration right after onboarding to our focus on DEI, as well as areas of building expertise within our existing teammates, as well as being able to have them move laterally throughout the various areas of Member Supervision to have that fuller understanding of the entirety of our mission.

Externally, a key area has to be what all firms and all industries are seeing as a key existential threat, which is cyber. Whether it's cybersecurity issues or cyber-enabled crime, that's going to be an area of focus for us as well as it should be for our member firms. Reg BI will continue to be a high priority for us to look at working closely with the SEC as well as our membership as we look at that new rule that came on last year and we are in the midst of our exam process in that area.

And then another generalized category of emerging risks or emerging threats that we're continuing to see, ranging from complex products to other items that have come up and will continue to come up on our radar because the landscape will be driven a lot by what's happening in the markets, what's happening with investors, as well as what's happening with external forces. So that's going to continue to be an area that we're going to be focused on to be the most nimble we possibly can to be in front of these risks on behalf of our member firms.

09:50 - 10:03

Kaitlyn Kiernan: So, speaking of some of these emerging risks, I know we have the Report on the Exam and Risk Monitoring Program due out any second. What are some of the areas of focus for the Exam Program in the year ahead?

10:04 - 10:59

Greg Ruppert: So, I don't want to front run the Report too early, but you're right, it is due out momentarily and it's an interesting area that we hear a lot of firms still calling it the Firm Priority Letter. And I know most firms are waiting for it and they can't wait to pore over it. But like last year, this year we're following suit and we're combining the Exam Findings Report with the Firm Priority Letter. And in that we're going to have a number of areas to call out.

Obviously, I already gave away that cyber is going to be a key area of focus, Reg BI. But then there are other areas that would be consistent with Reg Notices you've seen throughout last year. But then also there's areas where we're going to have new rules coming out, and obviously we're going to have to be assessing those new rules and the compliance with those new rules over the course of this year. So, we're adding on to what we provided last year and hopefully a well-received product with our membership, as it was last year.

10:59 - 11:10

Kaitlyn Kiernan: And have you put any thought yet into what changes made as a result of the pandemic will maybe be sticking around as we kind of enter year three of our new world?

11:10 - 12:38

Greg Ruppert: So obviously, one of the top questions we get is around exams. I would divide that into the remote exams that are expected to be done by our membership, but then also our firm exams and what's going to be done remote versus on site. I would say at this point, we're studying very closely, leveraging two years of metrics where we have empirical evidence showing what we've been able to see from doing a remote exam, what success we have, what gaps might exist in that coverage. So, I would say at some point we're going to be in a position to make a better determination of what a post-pandemic exam program is going to look like, specifically related to what we actually need to be on site for. So that's something that is currently in process, but I can see some opportunities that we would have there.

Another thing that we've done from a staffing perspective is we've been able to be location agnostic, where previously we used to hire based in either district office or a quasi-headquarter function for the teams. What we've seen during the pandemic is our ability for teams to connect remotely and be able to execute against our mission without much issue. And so, from that standpoint, we've been able to increase our talent pool and our ability to hire, given that we are location agnostic in terms of looking for the best talent wherever they might be. Also, another thing, Kaitlyn, is I anticipate it advancing our commitment to diversity, equity and inclusion.

12:39 - 12:46

Kaitlyn Kiernan: So, I think that's a great look at some of your shorter-term priorities. But long term, what are your goals and priorities in this role of Member Supervision?

12:47 - 13:35

Greg Ruppert: So, I have to tell you briefly back to technology, so as we continue to build our technology, what's going to be critical for a technology buildout is leveraging the information that we already have, the regulatory intelligence that we have across FINRA and being able to take from that using advanced analytics and identify trends, connect dots and make earlier assessments in the lifecycle or the intelligence cycle of what we're seeing.

And that will allow us to pay forward a number of opportunities to not only our exam teams and other areas that we're looking for additional regulatory oversight needs, but also giving advance notice to member firms and others of what potential risks we're seeing much sooner in the process.

13:35 - 13:42

Kaitlyn Kiernan: And do you have any early examples you can share for how you'd like FINRA to do this and share this information?

13:43 - 16:36

Greg Ruppert: One of the great examples we picked up stemmed from the creation of the Financial Intelligence Unit within the National Cause and Financial Crimes Program. We were seeing investor complaints coming in where investors were under the mistaken belief that they had placed their money with a registered representative at a member firm, at a broker dealer.

Our investigation showed that there was a imposter scheme that was going on where a criminal network was using real information around registered reps—so real names, real addresses, as well as the firms that they worked for—and creating fake websites that were enticing investors to invest in other areas such as cryptocurrencies, only to find out at a later time they weren't investing in anything at all. They were just handing money over to the criminal groups as part of a scam.

Our ability to get in front of this provided the opportunity for early identification of these websites and social media sites that the criminals were using and work to either shut those down or get vital information into the hands of the registered rep and the firm and instruct them how those could actually be shut down before we would even see complaints coming in from investors. And then the benefit to the member firms is having early identification for them to take action so that they're not investigating.

And I can only imagine from the back end of getting this complaint from an investor that turns out not to even be an investor at the firm. The amount of investigation work that has to go into an internal investigation, only to find out that the rep was not trading away, that there was no relationship between the person that was making the complaint and the rep and the firm are also victims of a crime. And so, from that standpoint, I really look at those types of situations where we can leverage information coming in externally from other member firms who are unfortunately first to see a particular crime area, but then paying that forward.

And hopefully we've seen, and our membership has seen, an improvement in the actionable intelligence that's been coming out in our Reg Notices that they can leverage to their benefit and move quickly and set up the controls and education that they need. Speaking of education, where we're hoping to go with this is how do we combine all of this information from where we sit between member firms, as well as with our relationships with law enforcement and other regulators in terms of packaging up materials that firms can provide to their clients. So we are frequently interacting within Member Supervision with our peers and colleagues over in Investor Education, so we might be seeing something that we're alerting firms to, but there's an opportunity to alert all investors.

But then our future plan is to combine that information and leverage the firm's relationships with their own clients, who are also the investors we protect, by the way, and be able to provide FINRA-branded information.

16:37 - 16:56

Kaitlyn Kiernan: It sounds like a great way for FINRA and firms to work together in the name of investor protection. In addition to law enforcement and the firms, I imagine you're also working closely with your fellow regulatory operations leaders, Jessica Hopper and Stephanie Dumont. You are all still relatively new in your roles, but how has that been going so far?

16:57 - 17:52

Greg Ruppert: Great. I'm the newest of the Reg Ops crew, but I was welcomed with open arms and we meet on a weekly basis, if not more, to talk about the interconnectedness between the departments. So, we have a lot of opportunities and even from the past, we have a long standing working relationship across our teams very successfully in a number of larger scale initiatives. But there's without a doubt the interconnectedness between Market Reg, Enforcement and Member Supervision. And with that from a leadership level, it's important for us to set the standard that a close, collaborative and engaged working relationship is going to be critical. I'll turn also to my colleague and friend Jessica Hopper today, a phenomenal example in another podcast with the PLI Institute. I think it's called inSecurities. And from that, she talked really in-depth about where we're focused on from the Reg Ops perspective and how we're going to be carrying that forward.

17:53 - 18:03

Kaitlyn Kiernan: We will link to that PLI podcast with Jessica in our show notes. You were the founding head of NCFC. What do you see as the future of that program?

18:03 - 20:38

Greg Ruppert: Well, I'm really excited that not only that I had the opportunity to found NCFC, but in my movement up to the head of Member Supervision we found an excellent person to take over the helm of NCFC, and that's Bill St. Louis. He is a longstanding FINRA veteran, having worked in Enforcement and Exams, as well as most recently Risk Monitoring. He brings a critical piece that I think speaks to one of my first comments in the podcast around what my internal priorities are going to be - the interconnectedness of Member Supervision. Him having worked in those key areas from those perspectives, he has not only the visibility into and the intricate working knowledge of how those structures operate, but also those strong relationships and who the key players are.

Adding into that, Bill has very strong relationships with the SEC. And he was actually an integral component of our Reg BI policy work with our Office of the General Counsel. So, he has touched a number of key core initiatives and then adding into the NCFC equation, it's going to be bringing them right into that loop. So, I think it's the combination of the perfect person with the perfect experience at the perfect time to take on that leadership.

And they're doing some amazing things. We just finished with our inaugural firm outreach on cybersecurity and cyber fraud, where we were able to connect the FBI regional expertise from an FBI field office with member firms in that region. So, member firms have heard me a number of times saying it's better to have a relationship with law enforcement prior to an event happening. You don't want to be in that crisis mode trying to figure out who to reach out for, and this is what we're able to bring to member firms is not only a name and a face but actually a direct phone number to reach out and engage when the crisis happens, but also to build that collaborative relationship with FINRA's expertise in the middle of it. So, the West Coast version has already happened. But I urge you, if you're in other regions to be on the lookout for this event, it's not just for your cyber team, but it's also for any of your compliance and fraud teams as well. It's going to be a recurring tool that you missed the West Coast one, we'll let you go ahead and attend either the East Coast one or one of the other locations. But we don't want anybody to miss out on this opportunity, and we're going to continue these types of events into the future where we combine the expertise, whether it's regulatory, law enforcement or national intelligence, in with member firms to collect and be informed on that critical information.

20:39 - 21:03

Kaitlyn Kiernan: We'll link to where firms can find more information about those events in our show notes, and we'll also have to have Bill back on the podcast soon. Bringing us full circle Bill was on the podcast last year to talk about the Report of Exam and Risk Monitoring. So just to wrap up, Greg, what do you view as your biggest challenges in taking on this role?

21:29 - 21:46

Greg Ruppert: I would say the current market environment itself is very challenging. It's quickly developing. And given that what we're seeing in terms of how social media and other online presence is working in terms of impacting where investors are going and what they're following, as well as the globalization of not only our current pandemic environment, but from widespread issues that are driving various market events and investor sentiment. So, seeing those issues and being able to respond to them in a much faster way. But at the same time, trying to anticipate where we think we might see additional risks in the market or within our member firms or impacting investors is going to be really critical that we're able to get in front of that as best that we can.

21:47 - 21:50

Kaitlyn Kiernan: On the flip side, what do you think are your greatest areas of opportunity?

21:51 - 22:56

Greg Ruppert: So, I would play right off of that. I think every challenge provides us with an opportunity. So, as we continue to build strong relationships not only within Reg Ops but also within Member Supervision and leveraging the expertise of what FINRA has to offer, as well as looking at the vast amount of regulatory intelligence that we have and then take that forward and learning from our member firms who are on the front lines in a lot of these situations. So, seeing what they're doing, hearing from them of what their concerns are, is going to be critical for us. So we're going to have to be not only in regulatory mode, but also collaborative partnership listening mode and taking that together and then moving back out into our regulatory relationships with other regulators, whether it's at the state level, the SEC, internationally, as well as other areas of the U.S. Government that has vital pieces of the puzzle to connect all of these dots together, is going to be, I think, a perfect opportunity to FINRA, one that we not only are willing to do, but one that we're actually able to be able to step in and execute on.

22:58 - 23:47

Kaitlyn Kiernan: Well, Greg, thank you so much for joining us today to share your vision and your goals in this new position. It sounds like there is a lot of exciting things to come, and I'm sure we'll have you back on the podcast again soon to discuss more updates.

Listeners, if you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. If you have ideas for future episodes or thoughts to share on today's episode, you can email us at [email protected].

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Today's episode was produced by me, Kaitlyn Kiernan, coordinated by Stephanie Van den Berg and engineered by John Williams. A special thanks to Jessica McCormick. That's it for today's episode. Until next time.

23:47 – 23:53

Outro Music

23:53 - 24:16

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24:16 – 24:26

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