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.
Jaime Levy Pessin at