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Face to face

SEC’s Champ is very comfortable with change

Norm Champ moved around a lot before landing at his current job as the SEC's director of the investment management division, and that's good thing

As a young man growing up in St. Louis, Norm Champ became interested in investing. By the time he was in college, he knew he wanted to be a securities lawyer. After a stint in London as a Fulbright scholar, Mr. Champ headed to law school.

His career path after law school took a detour when he accepted a clerkship with U.S. District Judge Charles S. Haight Jr. in New York. “That was a lot of fun,” said Mr. Champ. “You get more securities law cases there than anywhere else (and) it was my first experience in federal service.”

He got back on the corporate law track in 1993, joining Davis Polk & Wardwell LLP in New York, where he specialized in mergers and acquisitions, and rose to partner.

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Norm Champ

  • Current position: Director, division of investment management, Securities and Exchange Commission, Washington and New York
  • Age: 49
  • Education: Bachelor's degree, Princeton University; master's degree, King's College University of London; J.D., Harvard Law School
  • Personal: Married, four children
  • Interests: Running
  • Division of Investment Management staffing requests for fiscal 2014 budget:
  • Headquarters staff
    Current: 153
    FY2014 request: 184
  • Disclosure
    Current: 64
    FY2014 request: 67
  • Interpretive advice
    Current: 39
    FY2014 request: 42
  • Rule-making and adviser regulation
    Current: 19
    FY2014 request: 33
  • Exemptive relief
    Current: 31
    FY2014 request: 33
  • Risk and examinations
    Current: 0
    FY2014 request: 9
  • *The new Risk and Exam Office is being established to monitor the risk-taking activities of investment advisers and investment companies, and to inform the division's inspection and examination program. Along with quantitative analysis of investment risk activity and both routine and targeted exams, IM staff will meet with strategically important firms to discuss internal risk governance and management. The FY2014 budget request also predicts new rule-making proposals for private fund advisers.

With the arrival of his first child, he was ready for a different schedule, which led him to hedge fund firm Chilton Investment Co. LLC in New York. His position there went through several iterations, as he served as both general counsel and a member of the executive committee. One of his favorite assignments as the firm expanded was opening offices around the world.

His tenure at the Securities and Exchange Commission has seen several changes as well. His first assignment in 2010 was with the Office of Compliance Inspections and Examinations, where he served as acting chief counsel and head of several programs, including those overseeing investment advisers, investment companies, credit-ratings agency exams and broker/dealers.

His work helping to reorganize the OCIE division earned him the Chairman's Award for Labor-Management Relations.

He earned a Chairman's Award for Law and Policy for his role in implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which among other changes, added 1,500 private fund firms to the rolls of SEC-regulated entities.

Now, as director of the investment management division, Mr. Champ is working to re-energize a group that, along with regulations ordered by Dodd-Frank and the JOBS Act, has an ever-changing universe of investment products and approaches to keep tabs on.

What were you doing at Chilton and how did that lead to the SEC? (At Chilton) there were a lot of funds; we were buying things and there were a lot of funding acquisitions. The next step was to help those clients form the funds, which at the time were mostly oil and gas. We went from roughly 20 people and $1 billion of assets to a peak of 150 people managing $9 billion.

There were several job title changes. I was put on the executive committee on the non-investment side, doing business development.

I spent a lot of time opening offices in London, Hong Kong and mainland China. You have to deal with the regulators in all those places. That was very interesting (and) fun. It's probably partly why I went into public service.

I joined the SEC on Jan. 1, 2010, as associate regional director for exams within (the Office of Compliance Inspections and Examinations) in the New York regional office. We were overseeing investment advisers in a surprising range (of firms), everyone from Goldman Sachs to a single-person shop.

After six months, (OCIE Director Carlo) di Florio made me the first deputy director of OCIE.

July marks the one-year anniversary in your current job. What have been the highlights? Last July, (then-Chairwoman Mary) Schapiro asked me to take over (the investment management division), which gave us an opportunity to have a fresh look at the division.

We wanted to get a lot of input about the commission from SEC staff, so we created feedback teams called SWOT teams — strengths, weaknesses, opportunities and threats. We interviewed people in all the other divisions. It was a relatively small project but it's had big dividends.

The feedback was that IM wasn't very transparent. The names were very confusing, for example the Office of Investment Company Regulation, which handles exemption applications. It is now the Office of Exemption Applications. We finished the organization chart about a month ago.

We prioritized, and our No. 1 priority is to pull together all the documents that are managed and issued by IM — rule releases, comment letters, exemptions, no-action letters.

Along with Dodd-Frank, there was Bernie Madoff. What did your office learn from that? After Madoff and (Robert Allen) Stanford, almost every (staff) person left OCIE. There were a lot of vacancies.

OCIE was covering a lot of things and took the brunt of (the blame). We had to figure out what went wrong. We spent a lot of time on what should we be doing differently. We really looked hard at what we should do. We brought in outside people. We created five teams: strategy; structure; people; process; technology and training. Another example was the development of the first exam manual so everyone is working off the same sheet.

OCIE used to be run primarily by regional offices. We changed that job and made compliance officials go out into the field. We also created the TRENDS database to put all (the compliance information) all in one place.

Dodd-Frank told you to create the new risk and examinations group within IM. How is it going? I think it's working well. We're still building it out. We're bringing in outside people with expertise in risk management and portfolio analysis.

How does the risk and examinations group approach the money management business? We look at risk three different ways — by industry, by products, and by firms — the largest one is firms.

With products, investors appear to want more returns (than what they are getting now), so lots of people are starting alternative strategies. We're seeing a lot more filings. We keep a close eye on that.

In December, we started accepting actively managed ETFs, and we're seeing a lot more. We've got one team looking to see if we can encompass a rule (allowing for less-complex ETFs without the need for exemptions).

The idea of our examiners is to piggyback on OCIE's efforts. There are a lot of benefits to that; before, we had to talk to OCIE to get on the (exam) schedule. OCIE is checking for fraud; our focus is on policy-directed sales practices.

What are the priorities for the investment management division? Our policy priorities are (new rules for detecting and preventing) identity theft; (prospectus rules and targeted disclosure for) money market funds; and (asset) valuation guidance, including a release on best practices. Valuation guidance is a place where risk and examinations (group) can really help us.

We're also spending time just understanding (Investment Company Act of 1940) funds better and reviewing the rules that apply to them. n

Face to Face, Money management, SEC,

This article originally appeared in the May 13, 2013 print issue as, "Very comfortable with change".