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Compliance perspectives on new regulations 2011 - Companies speak out on the impact of Dodd-Frank and FINRA initiatives - Ernst & Young - United States

Compliance perspectives on new regulations 2011

Companies speak out on the impact of Dodd-Frank and FINRA initiatives

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Most survey respondents considered the impact of Dodd-Frank and FINRA initiatives on their compliance program to be extensive.

We recently conducted a survey of broker-dealer compliance officers to gather perspectives and practices around new regulatory initiatives and amendments that will likely have a material impact on financial institutions: the Dodd-Frank Act and FINRA's know-your customer (KYC) and suitability rules.

We thought it would be useful to understand how firms and their compliance functions are responding.

The survey consisted of 12 questions focused on 4 specific initiatives:


1 The uniform fiduciary standard under Dodd-Frank Title IX
2 Regulation of the over-the-counter (OTC) derivatives markets under Dodd-Frank Title VII
3 The Volcker Rule regulating proprietary trading under Dodd-Frank Title VI
4 FINRA's new KYC and suitability rules (FINRA Rules 2090 and 2111)

Survey respondents

Responses were gathered between 20 March and 3 May 2011 from 42 individuals, generally representing large, global broker-dealers. Respondents replied anonymously.

Survey highlights

  • Most survey respondents considered the impact of the Dodd-Frank and FINRA initiatives on their compliance program to be extensive.
  • Development of new technology tools for supervision and compliance with new rules will require substantial budget allocations in 2011 and continuing into fiscal year 2012. This applies to new monitoring requirements for Dodd-Frank and FINRA rules, as well as overall risk monitoring.
  • Half of the respondents indicated that they will be hiring additional compliance staff. We believe that:
      • Those with a thorough understanding of the compliance function and with strong product knowledge will be in demand.
      • Those with experience in developing compliance programs overseeing OTC derivatives implementation are expected to be especially in demand.
  • Responding to regulatory inquiries was rated as a significant operational challenge, one that is expected to increase as exams will likely become more frequent and rigorous.

In this report, we explore these survey results across the following topics:

  1. Survey analysis: challenges with regulations
  2. Survey analysis: technology challenges
  3. Survey analysis: operational and budgetary
  4. Moving forward

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