About
A central tenet of Dill's approach to financial regulation and the management of financial and compliance risk is the crucial need to understand a regulated firm's business model. Policymakers, business and risk managers, and compliance practitioners all need to assess the risks flowing from a firm's unique strategy of generating revenue – what René Stulz calls a company's 'core' risks – that are central to the company's competitive advantage in the marketplace. This risk cannot and should not be offloaded. Instead, it must be managed. Firms should build a risk culture and design risk controls that allow them to fully exploit the potential of their risk-taking while minimizing financial and compliance risk.
Dill gained these and other insights in his years at Moody's Investors Service and as a regulator and corporate finance attorney. Moody's primary source of revenue comes from issuers who pay the firm to rate their debt, an obvious conflict that can jeopardize the objectivity and independence of its ratings. He was one of two employees asked by Moody's to design and build a new compliance rating function following the bursting of the dot-com bubble and ensuing accounting scandals in the early 2000s.
The policies, procedures, and internal controls had to be built from whole cloth since no precedent existed on rating compliance.
He and his colleague conducted a diagnostic of the ratings process by interviewing employees at all levels, from data entry personnel to the CEO, and by consulting internally with rating groups, in-house counsel and regulatory affairs, corporate communications, investor services, internal audit, and information technology. They designed a governance and internal controls system that broadened rating committee membership to ensure diversity of opinion, required data input from multiple sources, revamped rating analytics within the rating groups, revised analyst performance evaluations, and compensation practices, and established information walls between the fee and analytics sides, among other things. For him personally, the experience instilled a strong desire to hear all sides of an issue before making a decision and formally communicating his thoughts.
Other work experiences in the financial markets have enhanced Dill's ability to impart practical knowledge about the financial markets to his students and market practitioners. In 2006, Moody's hired him to launch and build a research service on covenant protections in bonds and leveraged loans. In developing this service, he met regularly to vet business strategies with in-house counsel, regulatory affairs, rating research services, and the related business lines. He designed the analytical framework for assessing covenant quality and launched a highly successful covenant quality index covering North American high-yield bonds. After subscription-based P&L plummeted with the onset of the 2008 financial crisis, he revamped the service with input from hedge funds and other asset managers, underwriters, and other market participants. The covenant research service, with offices in several foreign markets, continues to this day to be an important differentiator for Moody's corporate ratings franchise.
Dill's first book, Bank Regulation, Risk Management, and Compliance: Theory, Practice, and Key Problem Areas (Routledge: 2019), embodies the many insights gained from his academic and work experience, including his hands-on experience regarding the role of financial firms' business strategies in creating tensions with compliance obligations, on managing conflicts of interest, and on the convergence, through securitization, of of the banking system with the capital markets. Similar influences are reflected in his second book, Anti-Money Laundering Regulation, and Compliance: Key Issues and Problem Areas (Edward Elgar: 2021).
In 2021 he wrote several articles for practitioner publications, including ACAMS Today and Michael Volkov's blog, Corruption, Crime & Compliance, and several opinion pieces on Department of Justice settlements with Wells Fargo, Goldman Sachs, and other topics on financial regulation, which are posted on his LinkedIn page. In addition, he has written a Financial Times op-ed and was interviewed by the podcast, Compliance Time, on anti-money laundering regulation.
His current scholarship-in-progress includes an article on the impact of business models on regulatory compliance and the Anti-Money Laundering Act of 2020.
Dill's work at a premier financial regulator complements his industry insights from his work at a bond rater. He came to Moody's in 1996 from the SEC, where he was branch chief in the agency's Division of Trading Practices in Washington, D.C. His time at SEC was invaluable for two principal reasons. First, he learned – in great depth – key areas of capital markets regulation. This included anti-manipulation regulation, regulation of broker-dealers and securities sales practices, as well as the role of self-regulatory organizations, capital markets intermediaries, and the importance of market structure in ensuring fair play and transparency for all kinds of investors.
Second, he gained a highly nuanced understanding of the policymaking process in financial regulation. Many internal and external factors influence the SEC's interpretive guidance and rulemaking beyond the formal vote of its commissioners, including the incentives of senior agency management, the unproductive top-down dynamic of agency decision-making, intercessions by Congressional overseers for constituencies and the executive branch, and the policies motivating investigations and prosecutions of wrongdoing.
Throughout his career in finance and his more recent academic career, Dill has gained a broadly informed perspective on the challenges of translating regulatory objectives such as market stability and fair and transparent market conduct into effective regulation and an internal control environment in regulated firms.