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Day: May 9, 2019

SEC Official Warns Firms Not to Shortchange Compliance

In a recent speech, the Director of the Office of Compliance Inspections and Examinations, Peter Driscoll, admonished firms who do not adequately resource the compliance function. Calling compliance officers “partners,” Mr. Driscoll lauded their role on the “front lines” of regulatory compliance. Mr. Driscoll said that he could not “underscore enough a firm’s continued need to assess whether its compliance program has adequate resources to support its compliance function.” OCIE is concerned “when we hear directly from industry participants and read press reports that compliance resources and budgets are being cut or are not keeping up with firms’ risk profiles.” He stressed the importance of compliance as equal to other key business lines, critical to the success of the overall business in its role to protect the trust of clients, investors, and customers.

We have observed OCIE staff specifically ask about compliance resources and spending during examinations. Based on various research studies and our own empirical experience, firms should benchmark to spend at least 5% of revenue on compliance resources including personnel and technology. Of course, the actual spending should vary depending on the complexity and size of the business.