Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

SEC Alum Living Life in the Trenches Aims to Restore Credibility to Tainted Firm


Cindy Fornelli is walking the walk.

The former deputy director of the SEC's division of investment management who helped engineer a bulk of the new regulations governing mutual funds now has skin in the game, as she toils in the compliance trenches of a company rocked by the mutual fund trading scandal.

Bank of America, which oversees the Nations and Columbia fund families, recently ponied up $675 million to close the books on allegations of improper trading that sparked an industrywide probe a year and a half ago, resulting in the largest mutual fund settlement to date.

Now, with a number of senior executives and board members ousted and a former BoA broker facing felony fraud charges, the nation's second-largest bank is looking to send a message that it has cleaned up its act. One of the ways the Charlotte, N.C. -based firm is righting the ship is by hiring former regulators to oversee its compliance functions.

Enter Fornelli, a Kansas City, Mo. native who joined BoA last August after a six-year stint as a policymaker for the SEC and more than a decade building compliance programs for investment advisors. An expert on mutual funds and compliance, Fornelli, in the newly created position of Compliance Executive for Securities Regulation and Conflicts Management, is responsible for looking around corners and over hills for potential conflicts that could arise across the bank's different lines of business.

Affectionately called the "Conflicts Czar" by her peers, Fornelli faces the daunting task of coping with the fallout from the bank's recent legal entanglements and its blockbuster merger with FleetBoston. Driven by a tireless work ethic and strong Midwestern values, traits imparted by her late father Bill Fornelli, a former steelworker, Fornelli is proving her mettle among the regulated by rolling up her sleeves and putting her policies to the test in the real world.

Money Management Executive Senior Editor Kevin Burke caught up with the affable attorney in her corner office at 100 North Tryon Street overlooking downtown Charlotte, where she is still getting used to the slower pace of the South and its fewer shopping hot spots.

To hear more on her new digs, her proposed fixes for the rift between funds and regulators and where the industry is headed, read on:

MME: What was the impetus behind your departure from the SEC?

Fornelli: It was the right time to go. I know it sounds corny but I firmly believe that you have to eat your own cooking. When I was at the SEC, it was the most active time in recent history, perhaps in the whole history of the division of investment management, where I was an integral part of numerous regulatory reforms. I really had a large role in driving that policy, and I was very curious, "did we get it right?"

I know we certainly did it right theoretically, but did we do it right practically as well? An in-house role in compliance certainly puts you in a very good position to see how it really does work, to see the practical aspects of the laws we created and why we created them.

MME: What does your arrival mean for Bank of America as it looks to avoid future transgressions?

Fornelli: My having come from the division of investment management brings a certain amount of credibility with regulators, and demonstrates that the bank is committed to doing the right thing. That's part of what made me an attractive candidate.

I should point out that the bank was being proactive in that they conceived this position before the mutual fund reforms hit. But I also think that the reform effort crystallized how important such a role is. The bank was looking for a way to be able to speak better to securities regulators, and having come from the SEC, I certainly am in a position to do that. So one of the ways the bank is doing the right thing is it is bringing in former regulators.

MME: Has your recent experience among the regulated yielded any new perspectives?

Fornelli: I've learned that one size doesn't fit all.

While the bank has always tried to take an enterprise perspective, up until now there hasn't been a program or unit focused on that. While each line of business has compliance professionals working with it to develop, implement and monitor that line of business, my role is to look across the bank horizontally to bring all the pieces together.

This is a fascinating but challenging position because I really get to see how all the pieces fit. I've also learned that I have to be flexible to make things work for each line of business and take into account their specific needs.