How State Street’s Counsel Navigates ETF Regulatory, Market Developments

Photographer: Stephen Hilger/Bloomberg News

Large asset managers face no shortage of legal considerations. As managing director and managing counsel at State Street Global Advisors, Joshua Weinberg helps navigate a shifting regulatory landscape on behalf of the $2.7 trillion-asset management business of State Street Corporation, the financial services and bank holding company. Weinberg also seeks to foster stakeholder trust through ongoing, timely communication.

“When an ETF-related issue arises, my phone rings off the hook, and before the end of the day, I have usually spoken with at least half a dozen impacted practitioners,” said Weinberg, who also serves as the chief legal officer for the business’s ETFs and mutual funds. Fielding client queries speaks to the larger role he believes is required of corporate counsel. “Some organizations like to keep their legal team in the background,” he said. “Our business partners now instinctively involve us early on in any new client matters.” 

Learn the steps Weinberg and his legal team take to ensure this outcome.

In 1993, State Street joined the American Stock Exchange in launching the first exchange traded-fund in the U.S. How do you stay apprised of evolving ETF regulations, and ensure you’re not “caught by surprise”?

We live in a dynamic regulatory environment, and staying in the know is one of my core responsibilities. As an active member of a number of industry associations, including those devoted specifically to ETF matters, I maintain regular contact with my counterparts at peer ETF issuers, law firms, and with other market participants to ensure that not only are we not “caught by surprise,” but that State Street Global Advisors is at the leading edge of the conversation around regulatory and market developments.

We keep a close watch on regulatory agendas, monitor industry publications, and actively engage with regulators and self-regulatory organizations. When an ETF-related issue arises, my phone rings off the hook and before the end of the day I have usually spoken with at least half a dozen impacted practitioners. The registered investment company bar is quite a small one, and a small subset of those attorneys focuses on ETFs, so it does not take long for developments to be socialized.

In late June, the U.S. Securities and Exchange Commission issued new proposed regulations on ETFs. How will the new rules impact State Street Global Advisors’ legal department, and how are you adjusting your efforts accordingly?

State Street Global Advisors generally supports most elements of the proposed ETF rule. We are still evaluating the impacts of the proposed ETF rule on our operations, and we expect to submit a letter to the SEC highlighting cer tain areas that we believe should be considered further.

I will not front-run our comment letter, but I will say that we believe that the Division of Investment Management staff and commissioners were thoughtful in their approach in drafting of the rule proposal and heeded concerns that any proposed ETF rule not be overly disruptive to the ongoing operations of an incredibly popular and successful product innovation.

Since the ETF rule proposal was published, the State Street Global Advisors legal department has been busy preparing summaries and impact analyses to educate our business and operations colleagues. As a recognized market leader, we have also been fielding client inquiries and participating in industry education initiatives, such as webinars and roundtables.

Earning clients’ trust is paramount to financial firms’ longevity. What steps does your legal department take to ensure that State Street Global Advisors earns clients’ trust?

Our legal department considers itself to be a partner to the business of State Street Global Advisors. As such, we are active participants in client relationships and seek to represent the values of our organization, chief among them being a trusted partner. We are fortunate to have a number of industry-leading experts in our legal department, and we enjoy being put in front of our large institutional clients to demonstrate our expertise and tackle issues.

When your fund lawyer has an in-depth conversation with a client’s chief risk officer about the particulars of a challenging new regulation and raises issues the CRO had not considered and then suggests practical solutions, the client walks away feeling that they are dealing with a trusted partner. When your fund lawyer helps to craft a solution to a complex client problem, the client is ecstatic and wants to bring you more of their mandates, which makes our business partners ecstatic.

Some organizations like to keep their legal team in the background, but we have proven time and again that the State Street Global Advisors legal department adds value to client relationships, and our business partners now instinctively involve us early on in any new client matters.

In 2012, State Street Global Advisors became a signatory to the UN Principles for Responsible Investment. What legal challenges are involved in ensuring that State Street funds follow environmental, social, and governance mandates—and how does your legal team address them?

We have found that the challenges associated with ESG investing are less on the legal side, and more on ensuring that people understand what we mean when we talk about ESG investing and what actions we are, and are not, taking to support those efforts. The legal department helps to craft the messaging around our ESG products and initiatives to help ensure that investors, regulators, and the public have a complete picture of what we mean when we say that we are supporting ESG efforts.

Our asset stewardship program allows us to proactively monitor and report the impacts we have in improving ESG practices in our portfolio companies globally. These efforts are aimed at promoting long-term sustainable returns on behalf of our investors.

State Street has made a point of supporting volunteer and charitable efforts. Can you tell us about the legal team’s involvement?

As an organization, and as individuals, we feel that it is incumbent upon us to be a local citizen and give back to the community. The legal department recently orchestrated a clothing and necessities drive for a local organization that supports the transition of formerly homeless individuals to permanent housing. We also take advantage of State Street’s policy that encourages employees to participate in volunteer days.

Members of the department spent one day at a local food bank, one day preparing a zoo enclosure for a retiring animal and another day cleaning up at a nature center and wildlife sanctuary.

What’s ahead for your legal team?

There is never a shortage of emerging legal matters for a large asset manager. There are a number of publicly disclosed SEC initiatives that are likely to have an impact on our operations, including potential changes to the investment company disclosure regime, funds’ use of derivatives, and fund of funds arrangements.

We will be active participants in discussions about the merits of any such proposals. California recently enacted a new privacy act that some are comparing to the European Union’s General Data Protection Regulation in terms of scope and impact—that is certainly going to keep us busy. And, as always, we will be vigorously supporting our business partners’ efforts to invest responsibly to enable economic prosperity and social progress.

This profile originally appeared in In-House In Brief, a biweekly newsletter of Big Law Business and the In-House Council. To receive up-to-the-minute news and analysis curated specifically for in-house counsel, subscribe for free todayLearn more about the In-House Council event series.