Compliance with Sarbanes-Oxley has been a considerable cost burden on the investment management industry, but after a year of working to stay within the limits of the regulation, firms are beginning to uncover methods of offsetting some of the expense.
A new TowerGroup report reviewing the impact of SOX on the asset management industry indicates that many managers have emerged from the first year with new and useful data on their internal processes. This data will allow the cost-conscious investment managers to improve the efficiency of key business areas.
In the first year of SOX compliance, implementation of the new regulatory framework was pricey, the report states, and spending on internal and external audit functions will continue to rise. However, TowerGroup believes that compliance with Section 404 of SOX – which requires the annual assessment of the effectiveness of internal control structures and procedures – will reveal deficiencies, which in testing, addressing and reengineering will ultimately allow investment managers to realize cost savings.
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