Some asset managers will double their staffs and pour more money into compliance efforts this year to fulfill new regulations laid out by the SEC under the Investment Advisers Act, according to a survey by CFA Institute and the Investment Adviser Association. The average number of employees performing compliance functions is estimated to rise to four from one or two, the survey of 183 asset managers found. At the same time, compliance costs are expected to jump to an average of $221,900 in 2005 from $144,394 last year. Asset managers expect compliance costs to increase 11% in 2006. Compliance-related expenditures are greatest for firms with $1 billion or less in assets under management, the survey found.
The number of staff hours spent on compliance also was estimated to double in 2005 to between 1,001 and 2,000 hours. The increased manpower comes as deadlines loom: A new rule requiring most hedge fund managers to register under the Investment Advisers Act goes into effect Feb. 1.