“As a result of this study, we’d like to see greater regulatory efficiency – equally robust investor protections but at a lower cost. The industry is absolutely committed to compliance, but we hope this highlights the need for rules and regulations whose costs do not exceed their benefits,” said Marc Lackrtiz, President of SIA.
The study revealed that restructuring parts of the NYSE and NASD to reduce regulatory duplication could result in significant cost savings.
“Having two regulators is like having to fill out two sets of federal tax returns from two different countries, each with its own rules and requirements and each needing different tax advisors,” said Lackritz. “Our firms need one rulebook, one set of procedures, one set of examinations.”
“We’re not advocating regulatory roll-back here. In fact, re-writing existing guidelines would only increase costs. Instead, we hope that going forward this study influences how policymakers think about the rules they write,” added Lackritz.
The study found:
- The cost of compliance has risen rapidly, nearly doubling in the past three years. It reached an estimated annual total of more than $25 billion in 2005, up from $13 billion in 2002.
????A substantial portion of these increased costs were avoidable. They reflect: duplication of examinations, regulations and supervisory actions; inconsistencies/ lack of harmonization in rules and regulations; ambiguity; and, delays in obtaining clear guidance; among other things.
????The overwhelming bulk of total compliance costs were staffing-related. Over 93%. Meanwhile, out-of-pocket expenses and capital spending to meet compliance obligations increased rapidly, doubling or tripling in most cases.
????Securities firms reported receiving an average of 231 inquires per firm over the last 12 months, nearly one for each business day.
For a copy of the study:
http://www.sia.com/research/pdf/RsrchRprtVol7-2.pdfFor a copy of the survey report:
http://www.sia.com/surveys/pdf/CostofComplianceSurveyReport.pdf.
