View from the C-suite: Blackstone’s head of compliance

Blackstone’s global head of compliance, Marshall Sprung, on striking the right balance between proactive and reactive

How has your role, and the compliance function, evolved?

I would point out two key dimensions: integration and technology. The business has greater appreciation of the extent to which compliance can be used to enhance our business objectives, which has led to increased compliance integration into business practices on every level, including product development, deal diligence and financial reporting. This ensures compliance is empowered and continues to have a seat at the table at the most opportune moments to partner with the business. And advancements in technology enable compliance professionals to be more proactive and efficient in ways that enhance their contribution to the firm.

What single activity or aspect of your role takes up the most bandwidth on a daily/weekly basis?

No two days are alike for me at Blackstone. Each day I balance the immediate issues that arise – information wall requests, conflict of interest assessments, data privacy questions, for example – with the longer-term strategic goals that I have set out for our global compliance program. In that area, I strive to ensure we have the appropriate talent, resources and structure to support both the firm’s existing and new businesses or initiatives. Striking the right balance between reactive and proactive work is one of the most challenging aspects of the role.

What compliance/regulatory issues keep you awake at night?

A challenging aspect of my role is its global nature. We have business activity occurring in numerous jurisdictions around the world, each of which has a complex regulatory framework. So I need to manage the critical compliance work associated with this activity – everything from routine filings to distribution of our funds to regulatory inspections. I am fortunate to have terrific teams in the US, Europe and Asia doing an outstanding job staying connected with the business in their region, their regulatory environment and firm leadership in the US.

How do you communicate regulation and compliance changes to the rest of the firm?

There is no one-size-fits-all approach. Some changes are relatively narrow in scope or impact only certain businesses, so communication by email or a targeted training suffices. Larger regulatory shifts require a broader and more co-ordinated effort, engaging all necessary stakeholders in both the business and support functions. One example is our implementation of the General Data Protection Regulation (GDPR), where we formed a steering committee consisting of key impacted functions – including HR, technology, legal and compliance and vendor management – and met weekly to drive the firm-wide change needed.

How important is technology and data to your role?

Very important and becoming more so. As our firm grows in size and complexity, it is vital that our people have the technology they need. We formed a Legal and Compliance Technology Steering Committee to facilitate collaboration between our compliance and technology groups and determine our priorities in the technology area. That collaboration has delivered numerous improvements, including workflow tools, conflicts and personal trade clearance systems, enhanced email surveillance and even a bot that will assist employees with routine compliance questions. Data has grown more important as we study ways to analyze the compliance data that we collect to identify patterns that might indicate a greater need for training about our policies and procedures.

What is the single biggest challenge for CCOs in real estate in the year ahead?

We remain highly focused on longstanding regulatory priorities like fees and expenses, conflicts associated with affiliated service providers, allocation of investment opportunities, and valuation and marketing. But the most significant issue is ensuring that firms’ use of affiliates and sponsor employees to provide fee-based services to properties is adequately disclosed. The SEC looks at many issues, but this one gives rise to the prospect for perceived self-dealing and often involves significant payments, a combination that makes this an issue that will continue to attract scrutiny.