Eighty-four percent of money managers and broker-dealers have conducted a compliance review in the past year, although 42% have not undergone a routine examination from the SEC in the past three years, said a Cipperman Compliance Services survey.
In the survey of 165 money manager and broker-dealer executives, 27% said they’d been reviewed by the Securities and Exchange Commission in the past year, while another 27% said the SEC review occurred between one and three years ago.
Also, when asked about the importance of compliance reviews, 33% of those surveyed said compliance reviews protect their brand; 25% said they help them retain compliance; 23% said reviews keep them honest; and the remainder consider compliance a cost of doing business.
“Managers are focusing more on reputational risk, and that’s been driven by pressure from institutional clients, particularly public pension funds,” said Todd Cipperman, founding principal of Cipperman Compliance Services, in a phone interview. “Those are really positive reasons for reviewing. Compliance is now getting a seat at the table” at money management firms, he said, “and (managers are) starting to budget more for compliance.”
Mr. Cipperman added that such internal compliance reviews by managers and broker-dealers are required by law each year.
In spending on compliance, 49% spent from 1% to 5% of revenue; 19% spent 5% to 10%; 11% spent less than 1%; and 21% were unsure how much was spent.
Fifty-six percent of firms have a stand-alone chief compliance officer, while 35% assign CCO duties to another position such as general counsel or chief operating officer. The remaining 9% listed “other” as a response.
The threat of SEC action as the result of whistleblowing has not affected survey respondents. Ninety-two percent said they had not made changes to their compliance programs as a result of possible whistleblowers, and 77% have not made changes in light of personal liability standards.
Thirty-six percent of firms surveyed had more than $5 billion in assets under management; 22% had $1 billion to $5 billion; 21% had $500 million to $1 billion; and 21% had less than $500 million in AUM.
The survey was conducted July 19 to Aug. 8. The complete survey results are available here.