CFO Studio Magazine with Robert Falzon, CFO, Prudential

12 WWW.CFOSTUDIO.COM Q2 2017 fees from the registration of new securities — such as in conjunction with an IPO—and must track them. An even more time-consuming process ensues when the Enforcement division wins a judgment and the SEC collects payments. “We have to track that [penalty] money as a receivable. Maybe that money’s going to Treasury, maybe it’s going to investors, but we have to make sure we’re recording that receivable on a timely basis, … apply payments to the right receivable, and help manage the distributions,” says Johnson. “There’s a very involved process and we’ve started developing a new system to manage that more efficiently.” Mr. Johnson Goes to Washington In October 2016, the Office of the Inspector General reported to SEC Chair Mary Jo White that financial management was no longer one of the agency’s key challenge areas. The office’s CFO, however, can’t stop fixating on internal controls; nor can most CFOs. But Johnson is not an accountant by training and “never envisioned” that he was “aiming to be a chief financial officer.” Ken Johnson grew up in Houston, did his undergrad work in American Studies at Stanford University, and then, in 1995, went to work for the mayor of San Jose, CA, in the budget office. “That was a great education in the importance of budgets: There’s very little that a government does that doesn’t cost money. So, if you understand the money, you can understand how a government works or how an organization works. It’s also a good lesson in [how] you have to make a budget work. Numbers are not forgiving. You have to make some difficult and practical decisions.” In 1998, Johnson left the West Coast to get his public policy degree at Harvard University’s John F. Kennedy School of Government. Hired by the Congressional Budget Office (CBO) in Washington, D.C., he analyzed the impact that a given bill would have on the federal budget, producing pages of dissection to support the advice CBO delivers to Congress. From there he moved to the SEC and worked on its budget. He became a Chief Management Analyst for the SEC in 2006, and helped develop the agency’s long- range strategic plan. In that role he also spent time on HR and Information Technology. “A theme through that [career trajectory] was a real interest in budgeting and following the money,” he says. “But I don’t think I actually ever once thought about the idea of landing a CFO position. I was really just hopping from one lily pad to the next, looking for the next opportunity that interested me.” Furthering the SEC’s Effectiveness Under Johnson, investment in technology has grown. In FY2011, the SEC’s budget requested $57 million for IT enhancements. For FY2017, the agency has requested $106 million. He says technology, and particularly data Working with the SEC CFOs obviously play a key role in promoting strong controls in their companies, says Ken Johnson, CFO of the SEC’s Office of Financial Manage- ment. “And that’s critically important for us” — helping the SEC in its roles of protecting investors and facilitating capital formation. Asked how a public company CFO can most effectively work with the SEC, Johnson mentioned the rulemaking process. “The SEC seeks public input whenever we’re thinking about rulemak- ing,” he says. “Many of our rules affect the work that CFOs do or are responsible for.” When the SEC posts its proposed rules on its website, CFOs can “help us ensure that the rules are really carefully crafted to protect investors, promote fair and efficient markets, facilitate capital formation — and meet our mission in a way that is most cost-effective for them and for the economy.” In addition, comments al- ready received from all other interested parties can be read at the Proposed Rules section of the SEC website. The SEC monitors 9,000 companies, reviewing their disclosures and financial statements. The responsibil- ity to ensure that the com- panies in which the public buys stock are performing in accordance with U.S. laws and SEC regulations is a heavy one. “It’s critically important that we get those kinds of comments from CFOs,” Johnson says. SPECIAL FEATURE MONEY BUSINESS In preparing for a data breach, companies place responsibility for assuring compliance with privacy laws on individuals in a half-dozen offices. Cyber Risk Management