Investment Firms Deriving Value from Sarbanes-Oxley Compliance, But 'How Much' Is Still a Question

One year into Sarbanes Oxley, the US act created to protect investors by improving accuracy in corporate disclosure measures, it is clear that the Act has had significant impact on asset management firms, both publicly and privately held. New research

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One year into Sarbanes-Oxley, the US act created to protect investors by improving accuracy in corporate disclosure measures, it is clear that the Act has had significant impact on asset management firms, both publicly and privately held.

New research from TowerGroup, entitled “Sarbanes-Oxley Compliance After Year One: What Do Investment Managers Do Next?”, finds that while compliance with the Act has entailed a tremendous amount of effort by the investment management industry to date, many asset managers have come out of “year one” with new and useful data on their internal processes.

Whether a firm is publicly-traded itself, or invests on behalf of public companies, each step in the investment process has potential internal control weaknesses — ranging from areas visible to investment clients like reporting and billing, to portfolio trading, investment operations, and behind the scenes fund services.

Investment managers can soon use this data to improve key processes – from building internal control frameworks or adding external audits where appropriate, to presenting compelling arguments for new or better integration of existing technology solutions.

It is difficult to quantify is how internal costs at investment management firms are being impacted by the act. Asset managers that gain business intelligence, and implement process and technology enhancements, as a result of Sarbanes-Oxley compliance will recover some value, but not enough to offset the expense of compliance itself.

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