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Alternative Market Briefing

Cerulli finds global fund groups are underestimating the cost of regulatory compliance

Tuesday, December 04, 2012

Beverly Chandler, Opalesque London: The latest edition of The Cerulli Edge-Global Edition publishes the results of a survey of 21 leading fund groups, asking for their opinions on the financial cost of four core pieces of legislation: Markets in Financial Instruments Directive (MiFID) II, the Packaged Retail Investment Products (PRIPs) initiative, Financial Accounts Tax Compliance Act (FATCA), and Solvency II. The survey participants were mostly global firms answering from a European perspective. They were asked to assess each piece of legislation for initial set-up costs and the subsequent ongoing costs of compliance.

Cerulli reports that all respondents expect to spend up to €1 million (US$1.3 million) each per piece of regulation on start-up costs. "On that basis alone, the maximum initial spend per fund group will be €4 million" Cerulli says. "Of the four pieces of legislation, respondents say PRIPs will be the least expensive to comply with. The ongoing costs of PRIPs compliance are likely to be lighter than initial costs." Around 80% of the respondents said they would spend less than €100,000 annually. "Just one in five believe the annual PRIPs bill could be up to €500,000" the firm says, adding that with legislation still at the proposals stage, it believes the full cost of PRIPs will probably be a shock.

"Compliance with MiFID II will cost our respondents slightly more than PRIP......................

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