General Counsel at The Depository Trust & Clearing Corporation (DTCC)
As General Counsel, Ann Shuman is responsible for advising senior management and the DTCC Board of Directors on legal and regulatory matters. She also manages the company’s global legal team and serves on a variety of internal governance committees. Even though she states: “that’s really no different from the General Counsel role at any large, regulated company”, she does say that one of the most challenging aspects of the job for any General Counsel is balancing one’s time between acting as the senior legal adviser to the firm and serving as the leader of a group of busy professionals who cover a breadth of complex legal issues, where you can’t possibly keep up with all of the substantive matters they’re working on. Ann explains: “DTCC is fortunate to have a great group of lawyers with deep expertise and experience in a corner of financial services that can be arcane, but is also indispensable to the smooth functioning of the securities markets.”
In this exclusive interview, Ann speaks more on her role and the financial sector.
What legal and regulatory challenges does the financial services industry face? How does DTCC help guide the industry in the best way possible in response to these challenges?
The industry has experienced a tremendous pace of change since the financial crisis. In fact, regulators are still finalising rules governing new requirements in some areas, whilst at the same time regulators and legislators are starting to assess the impacts and effectiveness of rules issued earlier. DTCC plays a unique role in the industry because our clearing agencies and trade repositories are critical tools for satisfying the new requirements. In particular, clearing has become much more important. Our services help the industry comply with the new rules, better understand and manage risk, and reduce capital pressures.
At DTCC, we’re proponents of strong regulation that increases transparency, improves the functioning of the markets and mitigates risks – particularly systemic risk. At the same time, we want regulation to work, and we want policymakers to be informed on potential unintended consequences.
How has advanced technology changed the legal sector over the years and what developments are you excited to witness?
While technological changes have allowed all industries to work and operate more efficiently, so-called disruptive technologies have not yet been very impactful in the legal sector. However, new technologies are having a great impact on financial services and, as lawyers in this field, we can’t be effective if we don’t understand those impacts or fail to evaluate how they may alter behaviour or the ways in which securities markets operate.
Technological advancement will ultimately benefit investors and the markets, but there can be hiccups if the regulatory environment isn’t keeping up with the pace of change. At DTCC, we strive to be thought leaders on new technologies in financial services – the potential uses of distributed ledgers in clearance and settlement is a good example. We also work behind the scenes to find the pathways for the regulatory framework to adapt – if needed – to the ways in which new technologies will change back office operations.
The finance sector is often vulnerable to cyberattacks – what more do you think could be done to ensure firms remain protected?
Cybersecurity is top of mind for everyone operating in the financial services industry. For example, in DTCC’s Systemic Risk Barometer study, a bi-annual survey we conduct to identify current and emerging risks in the marketplace, respondents have cited cybersecurity as the top risk to the industry for three years in a row.
Market participants have been focused on this area for some time, and financial services regulators globally have now elevated the conversation to ensure preparedness and appropriate responses to cyber threats. The CPMI-IOSCO cyber resilience guidance and the European Network and Information Security (NIS) Directive are both examples of regulators successfully focusing much-needed attention on this important issue.
Common regulatory frameworks are helpful as they can be leveraged industry-wide. In our view, this is more effective than implementing overly prescriptive mandates that may not match diverse risk profiles across organisations. Moving forward, we’re encouraging regulators to harmonise cybersecurity mandates and guidelines to ensure firms are able to leverage best practices.
Also, as a result of the evolving nature and increasing emergence of cyber threats, there is a need for a greater level of interaction among financial firms. Organisations must communicate with each other and share threat intelligence information in order to defend against these attacks, and policymakers should promote threat intelligence sharing as a critical tool in the industry’s defences.
How does the changing nature of financial services affect your role? How difficult can it be to stay on top of things?
The industry has undergone so much change in recent years. Regulatory reform has really reshaped financial services. There is still a lot of uncertainty, particularly in the US with regards to how the Trump administration and Congress will proceed with proposals to pull back financial services regulation. It is inherently complex because of the sheer number of new rules that have taken effect since Dodd-Frank was passed. Firms have restructured, client expectations have changed, and industry practices have adapted. The same can be said about Brexit.
The financial markets are globally interconnected. We feel strongly that regulators and policymakers must coordinate and cooperate across jurisdictions. A fair playing field with clear rules promotes efficiency and protects all players, and coordination in a future crisis will be essential to reduce systemic risk.
DTCC offers several different services – in your opinion which are the most difficult from a legal stance? Do you think more could be done to ensure reduction of these challenges? (i.e, if you could change any legislation involved, what would you change?)
DTCC faces different types of challenges for each business area. In some cases, there are challenges because the rules have not kept pace with changes in the marketplace. Particularly in the US, legislative changes are tough to achieve, and as a result many of our services operate within regulatory frameworks that were designed for the markets as they existed decades ago. The regulatory rulemaking process also takes quite a bit of time, and the agencies that regulate financial services have a lot on their plates.
In other parts of our business, we face challenges for the opposite reason: the rules are new, and they may not interact with industry structures in the way that regulators intended. That doesn’t mean the regulatory processes are flawed: on the contrary, new rule-making should be a careful and deliberative process, with lots of input from the industry and other interested parties. Some regard that as a sign of capture, but in my opinion it’s not. The regulators take their roles very seriously and want to get it right, without unnecessary expense or disruption or unintended consequences. That’s quite a balancing act. It would be great to see increased opportunity for policymakers and the industry to evaluate regulatory impacts over time and adjust where appropriate.
What would you advise young lawyers in order to prepare themselves for a career in finance/corporate law?
The ability to stay up-to-date on the drivers of the business is critical in financial services or any fast-paced, heavily-regulated industry. I strongly believe that you are at your legal best when you are knowledgeable about the business you support, its objectives and the interests of key stakeholders. This enables you to understand the motivations and intentions around, for example, the contract you are trying to complete or the joint venture you are attempting to launch.
At a personal level, I always advise young lawyers to stay open to unexpected possibilities. While following the established path after graduating from a law school will likely lead to a successful career, sticking only to that path also sets limitations on what you might be able achieve. Remaining open-minded and seeing each opportunity through your own personal prism and without being too attached to established norms might just lead you to a role that is more rewarding over time.
What are your upcoming goals for DTCC; what are you aiming to achieve in the next year?
Major political developments in the US and Europe will impact regulatory agendas, creating new risks and new opportunities. We are ready to play our part in that process. Tackling new challenges on the regulatory front is an inherent part of the job. My personal goal is to ensure we are always improving on that front, working to influence good outcomes and adjusting to change as it comes.
