Susan Ameel on RegTech's Role in Managing Risk and Compliance in the Cannabis Industry | #HashtagFinance

Susan Ameel, Partner at Global Regulatory Risk Advisors LLC, recently sat down with Grace Pedota during #WeedWeek to highlight how her firm is leveraging technology to keep up with the rapidly evolving regulatory framework for cannabis (3:45), juxtapose the ".com" bubble with the current boom in cannabis (10:45), and outline the important balance of having regulation that doesn't curb industry innovation (14:30). Listen until the end to hear Susan's impression of Hell's Kitchen in New York City and how she used to regularly swim to Canada from her home in Michigan! 

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Transcript

Speaker 1: 0:06

Okay.

Speaker 2: 0:08

Welcome to the hashtag finance podcast, part of the public entrepreneur content network. And this program is proudly sponsored by CSE. I'm here today with Susan Emil partner at global regulatory risk advisers. Hi Susan. How are you today? Hi Grace. I'm doing well. How are you? Good. Um, so could you tell us a little bit more about your role at global regulatory risk advisers? Sure. Um, we are a regulatory technology company and we focus on different emerging risks. Um, one of those risks happens to be cannabis. And so it's a new emerging industry with lots of risks and lots of regulations and say what we try to do is bring it all together and make it easier for firms in the industry to comply and do what they're supposed to be doing. That's great. And so what do you think is one of the biggest risks for cannabis company? Yeah, there are a lot of, a lot of risks. That's a very hard question to answer. Um, the biggest risk to you and the biggest stress? Um, I, I think that, you know, a part of the concern is that we obviously as a CSC that you have a lot of companies that are going public and so compliance risk and the legal risks. There are two huge factors from a compliance risk perspective. This is a new industry. Firms may not be familiar with compliance and, and those things they needed to do to, uh, have efficient controls in a culture of compliance to make sure that their employees are not putting the organization at risk. Um, and from a legal risk perspective, there are a lot of gray areas and a lot of, uh, unknown answers. Um, and it's really interesting from my perspective just because you don't have the level of interpretive guidance or enforcement cases that help firms understand and navigate those gray areas. Yeah, I actually was, have it, I had a podcast this morning with a gentleman that owns a seat at, was the CEO of a cannabis company. And he was saying that, um, they have to, cannabis companies are, um, have to move very fast because of all of the regulatory laws, especially in the states. They kind of change so quickly. Yes. Um, so what, can you give a little insight into, um, kind of like why they would change so fast in the states and, and how, um, you've seen cannabis companies keep up? Sure. Uh, we actually have a website called THC reg stat come where we monitor the regulatory changes within the United States. So how are accurate are they then like, I mean to the time that they are released, we monitor them on a daily basis. So we tried to provide as as much, um, notice, sorry is critical, the notice as possible. But I think what's really interesting and where you'll see over the next year is at the federal level, a lot of industries are, are preempted by the federal regulations like the securities industry, which means that each state has their own regulations, but generally they fall in line with the umbrella that has been outlined by the federal government. Um, with cannabis. And I, you know, with legislation that's currently being considered by Congress under the state's act, the states have led the charge in developing the industry. Uh, and what that means is that you have 50 different regulators ultimately that are going to be regulating hemp production, a CBD, uh, production, um, as well as recreational and medical marijuana. And, uh, so when you start to look at, you know, the federal regulations that the Usda and the FDA and the sec have around, uh, you know, the production of the products and, and the safety for consumers. Um, it's, there's a, a much heavier regulatory framework at the state level. So each state has their own regulatory framework and then it goes down to the municipality level. Um, so there are an extensive number of regulations. Um, he really do need technology to help you keep up with it, understand what you need to do, how it impacts your business, and then how to comply. And what kind of technology is that? Um, we have, uh, a technology called Obidio and a BDO is that governance, risk and compliance technology where we have a library of regulations. Uh, we have a reg change process where when those regulations changed, we update them and then provide you an alert to tell you, okay, you're in California, I'm here. This law just went into effect and this is how the state is adapting the reggae regulation to implement it. Oh. And by the way, here are the municipalities and how they're responding to that regulation as well. Oh, wow. Um, so how do you think that, because one of the Ceos I was speaking to earlier this morning said they have people, um, you know, on the ground, um, you know, conversing and, and, um, actively involved with regulators, um, in different states too, before the news as being released. They know about it. How do you think that that happens? Like is that, is that legal, is that, is that something that you're seeing? But if the, the really interesting thing about regulations is that every regulation tells a story and regulations are adapted to mitigate a risk that exists. And so a regulator may dent, might identify risks when they go to do an inspection or an audit and where they, where they might identify a problem that poses a risk to consumers, poses a risk to, uh, you know, the overall society. And so they need input because they're not in the business of running a dispensary or growing marijuana. So they need input from the industry on what effective practices can be put in place to mitigate that risk. Um, so it's really a great process to bring in the industry, um, and really get the most effective answer to the regulator's questions and what they're trying to, um, you know, mitigator or get rid of a, and there's a process called the American procedures act where the regulators have to publish the regulations. The public has an opportunity to comment and provide feedback and then the regulator can take that into consideration before issuing a final regulation. Okay. Um, and so going back to the technology that you're using, um, for people to get these alerts, um, is there any kind of, are using any kind of blockchain or security technology for this? I thought, I think there is, I think DC is using blockchain as something for their technology, but uh, no. So our technology is really, um, a a, it's a workflow tool. Yeah. That is really an amped up database that allows you to have a lot of regulations, do associations. And I think where we provide value as we, we tried to rationalize similar obligations across the states so where you might have 50 different obligations, we try to show you, hey, you can do this and satisfy all 50 and really boil it down to a one thing that uh, a entity should do to comply with the regulations. Okay. And how many people use your platform? Um, we are rolling out the platform right now, so, uh, we're continually growing and we are a startup. So, um, hopefully, you know, we'll have a lot of users. Oh, great. Have you gotten any feedback thus far? We have in, what's really interesting is the feedback that we're getting is that firms want to focus the regulations on really growing revenues as well as complying the regulations. Uh, so within the cannabis industry, you need to be able to identify where you can obtain licenses to engage in an activity. So a lot of the, um, the companies that are listed on the CSE are actually Vertel vertically integrated, which means they grow, um, they process, they, um, you know, manufacturer and sell it through their dispensary's, but they need to find a city where they can engage in these activities within a state. So what we do is we take the regulations and we pull out that information that will help these organizations identify, oh, that's where I can go to, to get a license and be there, uh, in the front of the line before everybody else tries to get that license. Because there really are in a limited supply. Um, and it's very difficult to obtain. Yeah. And how do you see the competition landscape for, uh, for cannabis companies? I mean, you're, you're offering like a technology for other companies to kind of get a leg up and in a state. Um, but how do you see a company really getting the majority of the people in a state as customers? Um, what would be their advantage? And I, at this point in time, we're seeing a lot of consolidation in the industry. Uh, so for example, if you can obtain a license, the other alternative is to by somebody who has a license. Um, and this is growing very complex because a lot of the local municipalities that are opting into marijuana and cannabis want to make sure that there are local residents participate within the revenue. And so there, there's this, um, there's this balancing act between, you know, making sure that your local citizens and you know, those people who have an unfairly, um, impacted by prior drug regulations participate in the new industry, but also those individuals need capital. And there is a lot of capital that, you know, people raised by listening on the CSC, um, that can be used to, to really build out a business in a much quicker fashion and generate more revenues for the cities and the states. Okay, great. Um, and so you, you have a little bit of history. I'm working with stock, a stock exchange and which sock exchanges where those, um, I worked at the American Stock Exchange and the National Stock Exchange that I've, I've over time I've worked with, with, uh, a number of them. Okay. And I'm seeing this like this cannabis industry, uh, it's this bubble. I guess it's, it's, um, it's interesting times. Could you really back to another, um, like industry that was quite similar where there was a lot of excitement and like people don't really know what to expect and this is, I've never seen anything like this. And then I have to say, I give the individuals who really move this industry along a lot of credit because, um, especially working in regulated industries, we're so used to hearing no, and, and you, you tend to give up and uh, these people actually did a wonderful job, the advocates and, and the, um, entrepreneurs, uh, to build an industry where now they're, you know, it's, they seem to legalization in the United States. So I haven't seen that type of industry in my career. Um, but you know, when we go back to, you know, the.com era back in the late nineties, um, where it was this brand new industry called the Internet and, and all of the companies that we're kind of jumping in, um, it seems a little similar, uh, depending upon, you know, what happens over the next couple of years. Um, and the ability for firms to maintain, um, the in, in to make the, the sufficient revenues to stay in business given the high levels of fees and taxes and competition that they're facing in the industry. Yeah. So do you think at have the same, do you think that the cannabis industry will have the same end result? Is the.com industry? Hey, now, ultimately everything's a.com right now, so, yeah, exactly. But hopefully they won't go through the growing pains that the.com industry went through in the late nineties. What were those growing pains? Um, I think that there was just so, such a rush to get in and there was an overinflation prices and perhaps not. Yeah, the business plans weren't as profitable as they could have been. Um, so you saw a great anticipation for future revenues that may not have been there. And so, uh, the companies may not have lasted as long as they should. And so you have your JD, um, which is very impressive. Um, and for those of you that don't know a JD, and correct me if I'm wrong, is doing your law degree and your Mba at the same time. Oh No, that's, I know you said that JD Mba. Okay. Sorry. So which the width of JD and I'm just a lawyer. Oh, days. Not just a lawyer. I don't practice law anymore, but yeah. So what did, what law did you want to practice when you first got out of law school? Like what was your kind of goal? This is kind of embarrassing, but I, I remember reading barbarians at the gate and my night was Burberry. It's like, it's, it's this story about finance and, um, you know, KKR and Nabisco and all these, these great companies. And I, um, had wanted to work in the finance field in, so, uh, you know, I went to law school and, and my first job out of law school happened to be on a trading floor and I thought it was the luckiest person in the world, which trading floor was that. Um, and that was the trading floor in, in Michigan for a company that had been sold. But, um, it was the greatest experience. It was during the.com era and it was very exciting. It was the beginning of electronic trading and, uh, which obviously the world is now, uh, we're, we're moving on to blockchain has the automation aspect and moving to blockchain technology. So, um, it's, it's been a fantastic ride and I look forward to, uh, the excitement in the cannabis industry as well. That's great. But we kind of lawyer did you want to be like when you first got out? Um, I, I wanted to be a regulatory lawyer. Okay. Regulatory. Okay. Always wanted to be a regulatory lawyer. I liked regulations. Oh, what, what is it about regulations that you like? Um, it's, it's the history. It's the story that the regulations tell. Uh, so any regulation that you see, something happened where the lawmaker said, we need to, we need regulation to make sure this never happens again. Uh, so when you look at the securities regulations, you had the crash in 1929 and other scandals that led to the development and the adoption and Nachman of additional laws and regulations. Oh, interesting. And so did you ever want to regulate something yourself in the day? Like, and if so, what was it? Well, I worked at a couple of regulators. I've worked at the Securities and Exchange Commission. Um, and I, I was a regulator. I'd add an exchange as well. Um, I, you know, I think regulators do an important job and yeah, they make sure that the wheels, you know, stay on the vehicle and the vehicle stays on the road. Um, you know, there are no downsides, meaning what happens to innovation when you have know it's too much enforcement and, and, um, the, uh, the regulators are not focused on helping an industry innovate and become more efficient, but become more comfortable in ensuring that the longtime policies, policies that they have stay in place. And so that's when a, you know, look at the state regulators within the canvas industry. Um, they really are doing that, which is helping the industry and coming up with the right solution that protects everyone, but yet allows the industry to continue growing. Oh, that's great. Um, and so you're from New York? I'm from Michigan. I'm from Michigan originally. You're living in New York? I'm living in. Okay. And, uh, what part of New York? I haven't been to New York yet. I want to go soon. I, I am a new resident of Hell's kitchen. Hell's kitchen. Where's that? Well, it's where you would expect hell to be. No, no, no. It's a show. It's, um, it's, it's a hell's kitchen is near a times square. It has a, it's a real character about it. And, um, there's been a lot of growth over the last couple of years, but it's still doesn't lose its character. That's great. And are, do you frequent in Toronto and you come to Toronto a lot? I, you know, growing up in Michigan, it used to come to Canada. Yeah. All the time. Yeah. In fact, I do want to say that I did swim to Canada even though my family says that I did not, it, we lived in a town that was, it was on a river directly across from Canada. And so you're used to swim to Canada. That's why I swam to Canada and I family debates whether or not it actually happened, but it did. Definitely. Yeah, definitely. And so you're here for the Benzinga conference. I'm here for the Benzinga Conference, um, which I think is really important, uh, given the, the lack of access to capital that the industry has right now. Um, these events are really important. Um, and it's, it's really important for these companies that are, you know, struggling to keep up with demand, struggling to, um, you know, putting the legal and compliance systems that they need to, uh, to reduce and mitigate risks, uh, to find partners who are, um, you know, willing to go on that ride and, and really give them the capital to grow their businesses. Yeah. And, and, um, at what kind of neat stories have you seen, uh, at the conference, at the conference? The conferences are I the there, um, what I love about the conferences, the number of entrepreneurs that, you know, come up with an idea and, and they execute and they not only execute, but they, you know, do it in a way that, um, is, is really remarkable. I'm so it, every story there is, you know, a background as far as how they started, how many couches they slept on before they actually, yeah. We're able to get the capital needed to, uh, you know, build out their dreams zone. Yeah. That's great. Um, and I guess, uh, another question I just wanted to ask was, another conversation I had today was saying that the sea of the cannabis company, you had said that, um, a lot of these cannabis companies and need the funds or the capital to be able to have a leg up on regulatory law. Are there any other resources other than your website just to get a leg up on what's going on before the, the law goes out? Like what, what can they do that's cost effective too to kind of battle that, that kind of, um, yeah. Um, there are, there are a lot of resources in, another thing I've been very impressed with, with the state regulators is the level of guidance that they provide to the industry. Um, they do a lot of the work for the industry that normally, you know, the industry would hire consultants or lawyers to do for them. So, um, you know, California, Oregon, Washington and Michigan, Massachusetts, they all issue a tremendous amount of guidance on what their expectations are for the industry and complying with the regulations. They provide checklists, they provide cheat sheets. Um, they provide their inspection guides, which you don't normally see within the, yeah. The other industries that I'm, I've worked in is that they actually tell you we're going to come in and this is what we're going to look for, which obviously you should be able to, you know, take that list and check to make sure that you have everything in place. Um, so there there's a tremendous amount of information out there. I think the problem is, is just that there's so much information. How do you collect it? How do you collect it all in? How do you synthesize? Because at the end of the day, you really want that culture of compliance where I as an organization, I should have my policies and my procedures in the standards that are not going to be, okay, we're going to do this in California. We're going to do this and Massachusetts and this initial, again, you know, we should have an enterprise system where we have enterprise policies, um, that drive the culture and drive a compliance with the regulations. Um, and the regulators can look to that to see exactly how they're fulfilling the individual requirements. Interesting. Well, thank you so much for coming and speaking with us today and you probably had a long day at the conference and, uh, we really appreciate you stopping by. Thanks for having us and, um, and let the CSE, you guys are doing a great job, so thank you. Thanks.

Speaker 3: 21:14

Hi, it's grace from the CFC reminding you to make sure to follow us on social media for the latest updates on our listed companies as well as new listing alerts. For more in depth content, be sure to pick up our free quarterly magazine, public entrepreneur available online@thecsc.com

Speaker 4: 21:33

oh.