The industrywide cost of compliance has nearly doubled over the past three years, according to the Securities Industry Association (SIA), and costs may be passed on to investors through higher prices and fewer choices. In a recent research report, "The Costs of Compliance in the U.S. Securities Industry," the SIA estimates the annual total cost of compliance for 2005 will exceed $25 billion, up from $13 billion in 2002. This increase amounts to nearly 5 percent of the industry's annual net revenues, the SIA notes.
The SIA's research divided the compliance costs of 55 participating member firms into four categories: staffing-related, out-of-pocket expenses, capital spending and opportunity costs. The study did not include remediation of customer losses, fines, penalties and settlements. Staffing-related costs accounted for an overwhelming majority (93.9 percent) of compliance expenditures.
According to the SIA, a portion of these compliance expenses could be avoided. For example, the removal of state and federal regulation duplications, the providence of clear guidance, and the reduction of the pace and volume of new regulations would lower compliance costs, the SIA says. <<<