US mutual fund managers are investing heavily in order to meet the deadline for compliance with new federal securities regulations that become effective on 5 October, says industry body NICSA.
Nearly all firms that participated in a survey conducted by Boston-based consulting firm Diversified Management Resources (DMR) said their firms had appointed a Chief Compliance Officer, required under the regulations. However, 30% said their employers had not yet confirmed details of the reporting structure for the role.
The regulations require mutual funds and investment advisers to adopt and implement a Compliance Program and designate a Chief Compliance Officer. Mutual funds must also obtain the approval of the fund board.
Though the survey is not yet complete, DMR principal Charles O’Neill, said firms had pointed out that their internal audit departments and anonymous compliance ‘hotlines’ would be used to police compliance in the future. He added that the survey also showed both internal and external audit firms – and, in some cases, special committees created by the COO – will in turn keep watch over the compliance department.
As a result, says DMR, the New Year will be a good one for compliance professionals looking for a job, with 60% of responses indicating employers will add to compliance staff next year. Most are seeking professionals with previous compliance experience for the CCO spot. Operations experience was cited as important by 30% of respondents. More than 35% of those involved in staffing decisions for the compliance department said they expect to pay CCO’s $300,000 or more.
Though they say they are on schedule, says DMR, mutual fund survey respondents also said preparation for the upcoming deadline has not been without its challenges. Many participants commented that the new regulations, broad in scope, put pressure on existing staff and imposed a special burden on smaller firms.
Participants in the survey, which is open for two more weeks, will receive an executive summary of results. A complete report will be available for purchase.
The project is sponsored by NICSA as well as by PA Compliance, PFPC and SalesLink, all securities industry service providers.
DMR is a consulting firm.