AUSWR
The Association of U S West Retirees
 

 

 

Street's Compliance Costs Jump
By Jaime Levy Pessin
The Wall Street Journal
Monday, February 27, 2006

NEW YORK -- The cost of compliance for the securities industry nearly doubled to an estimated $25.5 billion over the past three years, mainly because of increased staffing and frequent inquiries from regulators, according to an industry survey that will be released today.

The Securities Industry Association's survey of 56 firms represents the first quantitative assessment of how much the industry has spent to comply with the new rules enacted in recent years.  In 2002, the industry spent $13 billion on compliance, the survey says.

The survey's authors contend that regulators should work more closely with the industry to develop cost-effective ways to protect investors.

Spokesmen at the Securities and Exchange Commission, the New York Stock Exchange and the National Association of Securities Dealers declined to comment, saying they hadn't had a chance to thoroughly review the SIA's findings.

Staffing costs accounted for 93.9% of the estimated $25.5 billion spent in 2005, as firms bulked up both the size and compensation of their compliance staffs.  Chief executives now report spending 20% to 25% of their time on compliance-related matters, more than quadrupling the time they spent five years ago, according to the SIA.

On average, firms reported receiving 231 inquiries from regulators in the year prior to the survey -- almost one each business day.  Those inquiries ranged from quick requests for disclosures to extensive investigations.  For large firms, that average grew to 772 inquiries a year.

The SIA conducted the survey in the fall of 2005.

Write to Jaime Levy Pessin at jaime.pessin@dowjones.com

http://online.wsj.com/article/SB114101146202783998.html?mod=us_business_whats_news