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Insider Trading MNPI & Enterprise Conflicts

Compliance Control Room: View From The Corner Office

Star CEO Jennifer Sun gives her top-of-the-team perspective on this new software solution and why firms of all sizes can benefit from it

StarCompliance has been in the compliance software solutions business for nearly 20 years. For the majority of that time, the focus has been on developing products that detect and prevent employee conflicts of interest, specifically in areas like personal trading, gifts and entertainment spending, political donations, and private investments. The use of these products by enterprise financial firms in more than 50 countries, with more than half a million end users, has made Star a true global leader in the field.

Compliance Control Room is Star’s new control-room conflicts monitoring software solution. It occupies a complementary market space to that of employee conflicts monitoring, and was therefore a natural space for Star to evolve into. There’s overlap between the two areas. A natural adjacency. Encouraged by clients—who found themselves handling deal-conflict monitoring with manual processes like email chains and spreadsheets, or approaching the revamp point for an aging in-house system—Star leadership moved to fill what was a near vacuum in the vendor deal-conflict software solution space.

Deal-conflict clearance is a complex business. So many individuals and entities—both internally and externally—touch every deal, to clear them properly you need a lot of information. And all that information has to be organized such that compliance teams can quickly connect the dots and identify potential problems. The more people involved in each deal, and the more deals you have in motion, the more data there is to monitor. It was a space ripe for software intervention.

Following is Star CEO Jennifer Sun’s perspective on Compliance Control Room—how it addresses this complex market need, and how it all dovetails with the direction she’s taking the company.

Control rooms are intense environments. Missed deals mean missed revenue, but deals improperly cleared could mean regulatory trouble. They must be analyzed quickly yet reliably for possible conflicts. Compliance Control Room was designed from the start for these fast-moving, financial firm nerve centers. How do you see it changing the way control rooms operate?

“At my last company I designed and built deal-execution software: servicing banks, asset managers, private equity, and corporations looking to raise capital. By the time the deals ended up in our software platform, they had already passed through the control room. So I barely interacted with the control room, and almost didn’t know it existed. Coming to a regulatory compliance company, I talk to the same banks and asset managers I did before, but with an emphasis on their compliance teams. It’s made me appreciate more what goes on behind the scenes in getting a deal to market, and the enormous amount of inputs and information that needs to be properly reviewed and vetted before a deal can be approved. The control room truly is the firm’s nerve center, the focal point through which all deal-related data must pass.”

“Control room teams operate under major pressure. They have to be quick to respond and they can’t be wrong. If you’re a critical part of the deal-approval process within your firm, you have to be confident you’re making the right call—which means having all the information you need readily and quickly available is paramount. Star’s control room software aggregates critical, deal-related data into a single platform that manages and automates the workflow. So when teams are under the gun to make revenue-critical decisions on behalf of their firms, they can do it quickly and confidently.”

“And every data point used to make these decisions must be auditable, because when someone comes back to you and asks why their deal was rejected, you need to be able to show your work. Every deal that comes through the control room is a revenue opportunity for the firm. So rejecting a deal is huge, and the decision needs to be clearly substantiated. Control room teams are under-recognized for the speed and thoroughness required of them, handling the large volume of deals they do. One bank we recently showed our Compliance Control Room product to said, with the number of efficiencies and capabilities the software offered, it could change the perception, and the reality, of its control room: from that of a back- or middle-office operation to that of a true partner in the business, one that facilitates the decision-making process around the deals the firm takes on.”

Compliance Control Room was initially presumed to be only for large firms that did a high volume of deals. But as the product evolved, it became clear that small- and mid-sized firms—which have the same regulatory compliance obligations as the big firms—could also benefit. Could you speak to the application of Compliance Control Room to these smaller firms?

“Several months ago, we showed Compliance Control Room to a mid-sized, Midwestern bank. Their control room was staffed with one person. The person we were meeting with said to me: ‘I don’t know why I need your software.’ So I asked her how the bank manages its control room activities, and she said: ‘We use an Access database to manage the watch and restricted lists, and the conflicts clearance is done by the bankers.’ I asked her how the bankers cleared conflicts, to which she replied: ‘Our bankers have been here for over 20 years. They know every deal we’ve done and every person we’ve done it with. We don’t need a software system because they have that information in their heads.'”

“When you get closer to New York City and other large financial centers, this view changes. On Wall Street, even among smaller firms, employees move around a lot. You can’t rely on a banker being in the same job for 20 years for your conflicts management system. You need a system that captures deal-related information. So the closer you get to the epicenters of finance, the more the smaller firms buy into the fact they need control room software.”

A product like Compliance Control Room has to be able to drop into the chaotic environment of a control room and add value right away. How was Star sure they had gotten the formula correct? That Compliance Control Room would meet market needs?

“Whenever you launch a new product it’s essential to have a good partner, like we had. A client who believes in you, has a need, and is willing to partner with you to help drive requirements. Someone with equal skin in the game. But you never know for sure if your first client is providing requirements that are commercial and applicable to the broader market, or if you’re building what ends up being custom software for them. That’s the mutual risk in the partnership. They are taking a risk on having a vendor who has never built control room software, and the vendor is taking a risk that the requirements given to them are applicable to more customers. So getting market validation is critical.”

“Before we started building, we spoke to more than 20 other banks about their control room needs, and luckily we got the confirmation that we were on the right course. But I think it’s important to never think you’re done when you’re building software. Good software solutions that clients value are ones that continue to evolve with client and market needs. So while we’ve received great, early market feedback that we’re on the right track, the product will continue to grow the more our clients use it and the more we learn about their needs. At Star, our build culture is we don’t do things halfway. On one of our many trips, one large US bank told us our platform is the ‘control room of the future.’ That was so motivating for us to hear. If we weren’t already determined to make Compliance Control Room all it could be, that did it for us.”