Fifty-four percent of traditional money managers surveyed by Cipperman Compliance Services said they spend more on their compliance programs than they do on their legal counsel — a much higher percentage than alternative managers (25%) and broker-dealers (13%).
Traditional managers also allocate a higher percentage of their overall revenues to compliance than alternative managers and broker-dealers, according to the annual survey of financial services firms by Cipperman.
Twenty-four percent of managers of equities and fixed income spend at least 5% of revenues on compliance, considered to be the industry benchmark, vs. 11% of alternative managers and 4% of broker-dealers.
However, around three out of four clients of managers and broker-dealers have asked to review their compliance policies or interview those responsible for compliance — 75% for traditional managers, 71% of alternative managers and 74% of broker-dealers.
Also, 63% of traditional managers have a compliance committee, vs. 46% for alternative managers and 61% for broker-dealers.
Alternative managers, which “essentially had no guidelines for establishing consistent compliance practices,” are lagging traditional managers when it comes to compliance, said Jason Ewasko, managing director at Cipperman, in an e-mail. “In light of 2013 guidance from both the (Securities and Exchange Commission) and (Financial Industry Regulatory Authority) that specifically cited alternative investments as a point of regulatory and examination focus, alternative investment firms currently are still processing that compliance is a ‘must-do’ and not an ‘option.’”
Among the 180 respondents surveyed by Cipperman, 53% were traditional money managers, 15% were alternative managers, 13% were broker-dealers, 8% were wealth managers and the remainder were other financial services firms.