One of the more prominent issues these days for RIAs and broker/dealers alike is compliance. Research conducted by the AdvisorBenchmarking unit of Rydex (see page 104) found that legal and compliance-related expenses jumped nearly 153% for RIAs last year. But what kind of technology is the securities regulator using?
TowerGroup, the Boston-based research firm, looked at the SEC's technology plans in a recent report, "Winds of Change at the SEC: Analysis and Implications for the U.S. Securities Industry." Dushynat Shahrawat, the report's author and a senior analyst at TowerGroup, noted that the SEC's IT budget for 2005 is $113 million, more than two and a half times the size of its budget in 2002. With that level of funding, the SEC and its CIO, Corey Booth, can match the growth of tech spending by Wall St. firms, Shahrawat says. While Shahrawat believes that RIAs are not nearly as big an issue for the SEC as are the bigger companies--the SEC is "willing to let the small fish pass through" the regulatory net, he says--nevertheless the SEC is now able to procure the tools to track the companies it regulates. Moreover, the extra money will allow the SEC to not only gather more data and make it available to the public through its Web site and the EDGAR database, but also to expand its analysis of that data.--James J. Green