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Governance,
Compliance, and
Supervision in the
Capital Markets
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Governance,
Compliance, and
Supervision in the
Capital Markets
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SARAH SWAMMY
MICHAEL M MASTER
C
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Contents
Preface vi
Acknowledgments vii
AbouttheAuthors ix
CHAPTER1
CapitalMarketsParticipants,Products,andFunctions 1
CHAPTER2
HowtheFinancialCrisisReshapedtheIndustry 23
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CHAPTER3
Governance 33
CHAPTER4
Overview:CapitalMarketsCompliance 57
CHAPTER5
Overview:Supervision 89
CHAPTER6
CentralRoleofFinanceandOperations 99
IanJ.Combs,Esq.
CHAPTER7
CyberRiskRoleinGovernanceModelandComplianceFramework 129
AlexanderAbramov
AbouttheCompanionWebsite 157
Index 159
v
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Preface
A
s lifelong practitioners in compliance and governance for the capital
markets, we have seen many changes throughout our careers. Some of
the changes were driven by the natural evolution of products in the mar-
ketplace,butmanymorebysweepingregulatoryreformresultingfromthe
2008 financial crisis. These changes have obfuscated a clear path to con-
ducting business. We have crafted this book to provide both professionals
and nonprofessionals the fundamentals necessary to understand and work
throughtheregulatoryframeworksthatgovernourindustry.
SarahSwammyandMikeMcMaster
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Acknowledgments
W
e would like to express our enormous gratitude to our colleagues and
friends. As leaders in the industry your experience, technical knowl-
edge, and market insight helped to make this book successful: Alexander
Abramov,IanJ.Combs,andJohnGrocki.Thankyouforallofyourcontri-
butionstothiswork.
WewanttoextendaspecialthankstoLarryHarrisandColinRobinson:
LarryforeditingthemanyearlydraftsofthebookandColinforeditingthe
finaldrafts.
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About the Authors
SarahSwammyisaseniorvicepresidentandchiefoperatingofficerforState
Street Global Market, LLC, a registered broker-dealer subsidiary of State
Street Bank and Trust. She is also a member of the Global Markets Busi-
nessRiskCommittee.SarahjoinedStateStreetfromBNYMellonwhereshe
held several leadership positions including business manager and head of
supervisionforBNYMellonCapitalMarkets,LLCandchiefadministrative
officer for BNY Mellon Global Markets and principal overseeing the sales
and trading businesses. Sarah has held compliance positions at Deutsche
BankSecurities,Inc.,CSFBandBarclaysCapital,Inc.
SarahservesasamemberofNewYorkInstituteofTechnologyAdvisory
Board in the School of Management. She is a former member of the Touro
College of Education’s Graduate Advisory Board and a former member of
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the Executive Steering Committee for BNY Mellon’s Women’s Initiative
Network.
Sarah holds a BS in Business Administration and an MS in Human
Resources Management and Labor Relations from New York Institute of
Technology,anMAinBusinessEducationfromNewYorkUniversity,anda
PhDinInformationStudiesfromC.W.Post.Sheisalsoanadjunctinstructor
atNewYorkUniversitySchoolofProfessionalServices.
Michael McMaster is a managing director and chief compliance
officer for BNY Mellon Capital Markets, LLC, a broker-dealer affiliate of
BNY Mellon, chief compliance officer for BNY Mellon’s Broker Dealer
Services Division, Government Securities Services Corporation, and is
also the head of BNY Mellon’s Shared Services Compliance Group,
which services its broker-dealer affiliates and swap dealer. Prior to join-
ing BNY Mellon in 2010, Mr. McMaster was counsel for Rabobank
(aDutchbankingorganization),handlingsecuritiesregulatorymatters,and
Rabobank’s U.S. Medium-Term Note Issuance Programs as well as chief
compliance officer for Rabo Securities USA, Inc., the U.S. broker-dealer
affiliate of Rabobank.From 1998 to 2002, Mr. McMaster worked for
BNY Capital Markets, Inc.—a predecessor entity to BNY Mellon Cap-
ital Markets, LLC—and held the position of chief compliance officer.
Mr. McMaster also held positions as counsel and chief compliance officer
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x ABOUTTHEAUTHORS
for Libra Securities LLC and was an Assistant District Attorney in the
King’s County (Brooklyn, NY) District Attorney’s Office.Prior to moving
into legal and compliance positions, Mr. McMaster was a collateralized
mortgage obligation trader for Tucker Anthony. He graduated with an
undergraduatedegreeinFinancefromManhattanCollegeandreceivedhis
J.D.fromNewYorkLawSchool.Mr.McMasterisanadjunctprofessorat
New York Law School and is chairman of the Compliance Committee for
theNewYorkCityBarAssociation.
ABOUTTHECONTRIBUTORS
After completing his undergraduate studies in business at the State Univer-
sityofNewYorkatOswego,IanJ.Combs,Esq.,movedtoNewYorkCity.
HesoonbeganhiscareeronWallStreetonlyafewshortmonthsbeforethe
financial crisis of 2008 by accepting a position with the Financial Industry
RegulatoryAuthority(FINRA).Sincethen,Ianhasworkedinseveralcapac-
itiesforFINRA,includingasanexaminerandregulatoryliaisonaswellas
holding a position in regulatory policy. During his tenure at FINRA, Ian
attended New York Law School in the evening and graduated with honors
(cid:2) in 2015. He was also a member of the Law Review and a recipient of the (cid:2)
Harlan Scholarship. Ian’s primary expertise is in SEC and FINRA financial
andoperationalrulesandregulations.
Alexander Abramov is a technology governance, risk, compliance, and
informationsecurityseniorleaderwithover20yearsofexperienceinfinan-
cial services, advisory services, and life sciences. His roles span from the
Head of application development, IT audit manager, IT governance and
compliancepracticeleader,totheHeadofInformationRisk.(www.linkedin
.com/in/abramovalexander)
Mr. Abramov has been defining and leading information risk manage-
mentprogramsformultipleareasoffinancialfirms,includingbroker-dealer,
swapsdealer,primebroker,proprietarytrading,securitiesfinance,collateral
management, compliance, and operations. He leads organizations to cre-
ate risk-based and cost-effective information risk governance frameworks
toprotectfirms’informationassetsandachievecompliancewithapplicable
regulatoryrequirements.
Mr. Abramov has been a member of the board of directors of ISACA
New York Metropolitan Chapter since 2007, and was elected President in
2017.HiscredentialsincludeCertifiedInformationSecurityAuditor(CISA),
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