Executives of asset managers, alternatives firms and broker-dealers fear their firms’ regulatory and cybersecurity practices wouldn’t pass regulatory scrutiny.
According to Cipperman Compliance Services’ fourth annual C-Suite Survey, which polled more than 200 executives (CEOs, CFOs, CCOs and general counsel), 43% of hedge funds and private equity managers, along with 32% of broker-dealers and 25% of asset managers had such fears.
The firm sizes in asset under management were:
Less than $500 million: 25%;
$500 million to $1 billion: 28%;
$1 billion to $5 billion: 28%; and
Over $5 billion: 19%.
The poll found that executives had these concerns even as they devote more time to regulatory compliance. Sixty-one percent of respondents view compliance as a part of doing business, such as meeting regulatory requirements or attracting and retaining clients, up from 43% in 2016.
“These results should be a loud wake-up call to the industry regarding how they’re approaching compliance and exam preparation,” said Todd Cipperman, founding principal of Cipperman, in a statement. “The regulatory pressures from the SEC, FINRA, and large clients require a more professional approach than dual-hatting a busy executive or hiring or appointing an overwhelmed internal compliance officer.”
Todd Cipperman added that “because compliance has become so important to protecting the franchise, firms need to bring in third-party experts in the same way they have traditionally retained outside lawyers and auditors. One bad exam and penalty could do irreversible damage to the reputations these managers have built.”