Meeting the Securities and Exchange Commission (SEC) regulatory processes can be time-consuming and costly for investment advisors and chief compliance officers (CCO). Joot builds automated compliance tools for SEC-registered investment advisors to simplify and automate repeatable tasks . We spoke with Joot CEO Bo Howell about how the company came to be and what need Joot’s technology fills.
What is Joot’s origin story?
Howell: I’ve been a securities lawyer for over a decade and worked at the SEC in Washington, D.C., before moving to Cincinnati to work for Western & Southern Financial Group as a large asset manager. Working with smaller investment advisors locally and around the country, I noticed that many were managing their regulatory compliance in a manual way, which resulted in a lot of paper and a lot of printing. Technology was being developed for the investor-facing side and the trading side of things, but nothing really for the back-office side that would be focused on employees and regulatory compliance. I got this idea in my head that if somebody was going to build such a solution, it was going to be me.
A little over three years ago, I launched a platform for small- to medium-sized investment advisors around the country to help them with the increasing government regulatory burden. Our first clients were here in Cincinnati, and now we service over 50 companies around the country.
How was SEC compliance done before this tech?
Howell: It’s typically handled by somebody at the firm who often doesn’t really have expertise in SEC compliance. This makes it hard for them to design and implement processes around compliance. If they don’t necessarily know how to do it correctly, then because they don’t have the experience, the SEC may come in and do an audit. If they find things wrong, then it can take time and money to fix.
Probably the best analogy I can give is this: Taxes are a very complicated government code that most people don’t know about. You can do your [personal] taxes yourself and use something like TurboTax, or hire a CPA. Our technology does that for regulatory compliance. We not only help simplify the process through our software but we also have a service team to help.
What does the SEC look for?
Howell: The SEC is looking for policies and procedures around training, conflicts of interest, execution of trades, fiduciary duty, insider trading and so on. Companies are supposed to have these processes and controls in place to make sure nobody’s stealing money or committing fraud. There are many rules advisors must follow.
What are the liabilities?
Howell: The SEC fines usually start around $50,000. They can shut your business down, or your company can get sued by an investor if somebody did something inappropriate.
Can you describe how your product works?
Howell: We have a web-based suite of applications. There’s a compliance calendar, a document manager, a testing manager (which is like a workflow tool) and a personal trading manager. The personal training manager allows employees to report personal trading transactions, which can then be monitored for conflicts of interest. We also have a policies manager, which will create the policies that companies are supposed to have so they don’t have to be created from scratch. The policies are scheduled throughout the year, and documentation is created to establish completion. It’s very organized. If the SEC were to require proof that the company is compliant, then documentation would be available.
What are the advantages of having a startup in Cincinnati?
Howell: For one thing, working with Queen City Angels has been great, and they’ve been very supportive. We’ve created a board of experienced Cincinnati-based people and have many great mentors from local businesses. We’ve been lucky recruiting talent. On the development side, we were able to hire developers who grew up in Cincinnati while connecting with local universities for internships. We’ve had interns from Xavier University, the University of Cincinnati (UC) and Miami University.
We are members of Cintrifuse and do some office sharing there. Some of the people we’ve worked around have been great for helping us get our company off the ground and connecting us with potential clients and talent.