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Money Management

Gap found in managers’ confidence in compliance programs — survey

Forty-three percent of alternatives manager executives said their firms' compliance programs could not pass a regulatory exam, vs. 32% of executives at broker-dealers and 25% at traditional money managers, a survey by Cipperman Compliance Services found.

The survey of 204 high-ranking executives, including CEOs and chief financial officers, at traditional managers, alternative investment managers and broker-dealers also showed that while 64% of money managers and 68% of broker-dealers said their prospective clients ask to review their compliance resources, only 26% of alternatives managers said they did.

"On one side, you see CEOs saying that compliance has become more important, but then they say their compliance is not where they want it to be," said Todd Cipperman, founding principal. "What these executives are doing (with compliance) is not working." He said larger managers and broker-dealers have a sizable internal compliance staff, "but at $5 billion (in assets under management) and below, things get a little questionable. One compliance person alone can't handle it."

Traditional managers and broker-dealers also were far more confident than alternatives managers that their cybersecurity and data protection met regulatory requirements — 77% of broker-dealers and 72% of traditional managers said they were, compared with only 43% of alternatives managers.

Traditional managers also were far more confident than alternative firms and broker-dealers in their overall cybersecurity capability — 51% for traditional managers vs. 25% for alternatives firms and 23% for broker-dealers.

"CEOs want nothing to do with cybersecurity," Mr. Cipperman said."But guess what; you've got to deal with it. There's too much to do, too much to know. It's especially true when large clients come to do due diligence on a firm's cybersecurity program."

The survey of 67 traditional managers, 115 alternatives managers and 22 broker dealers was conducted July 18-Aug. 3.