FinTech Firms Look to Hire Compliance Officers
Financial technologies companies have always operated in a tough spot. Not only do they often occupy a space where regulatory guidelines are blurry at best but they also need to explain their innovations to agencies that might not fully comprehend these new ways of doing things. That’s why it should come as no surprise that a number of FinTechs are currently hiring for a key position: compliance officer.
As Bloomberg reports, companies like Robinhood, Coinbase, Betterment, and others are looking to fill various compliance-related positions to bulk up their existing departments. Given the nature of FinTech startups — which often includes the goal of growing your userbase quickly and getting new products out there — New York University finance professor David Yermack explains that these companies are turning to legal professionals to help navigate the highly-regulated industry as they attempt to push boundaries. Yermack even asserted that the FinTech sector’s need for compliance support could be a boon to law pros, saying, “This should be a bonanza for lawyers for some time to come.” Additionally Tribe Capital co-founder Arjun Sethi tells Bloomberg that venture capital firms have been pushing FinTechs to dot their I’s when it comes to regulation. He told the site, “When we meet with companies, in addition to speaking about the product, market and team, we also spend time on how they will execute within a regulatory environment. That means hiring the right type of people focused on compliance and best practices.”
While regulatory compliance has always been an important element of FinTech, the need has been heightened in recent months following a few missteps on the part of several startups. For example the cryptocurrency exchange Coinbase said last summer that it had received approval for three acquisitions only to backtrack, saying that discussions with the Securities and Exchange Commission were ongoing. Then last month the investment app Robinhood experienced its own debacle, announcing it would begin offering “Checking & Savings” accounts that paid 3% interest, had no fees, and were insured by the Securities Investor Protection Corporation (SIPC). Unfortunately, the day after the product’s initial promotion, the head of the SIPC stated that Robinhood hadn’t contacted the agency about their plans and that, from what he could tell, such accounts would not qualify for SIPC insurance.
On top of all that even arms of government are seeing pushback when it comes to FinTechs. Last year Office of the Comptroller of the Currency (OCC) announced plans to offer Special Purpose National Bank charters. However that decision has been endangered after the New York Department of Financial Services and the Conference of State Bank Supervisors filed lawsuits against the OCC. Although OCC head Joseph Otting has said the agency will continue with their plans as intended and that “A number of entities have decided that it’s still worth going forward,” it’s still unclear how many startups are interested in applying for the charters with the lawsuits looming.
Following a few recent missteps, FinTech scrutiny shows no signs of slowing. Luckily it seems that some of these startups have learned their lessons and are now investing in compliance officers that can hopefully prevent such errors going forward. In the best case scenario, this recent rash of hiring will help FinTech firms self-regulate and stay on the right side of the rules before a major clampdown on the sector comes to fruition.