Smaller banks, private equity firms and hedge funds are on the lookout for compliance professionals in response to Dodd-Frank, which will require many of these firms to register with regulatory bodies for the first time. Thousands of institutions will be hiring.
Months before financial regulation reform passed in July, firms had already started planning for the inevitable new registration requirements and monitoring. And it's no surprise: According to the Bureau of Labor Statistics, compliance is one of the fastest-growing industries. The agency projects a 31% increase in compliance employment from 2008 to 2018.
While mass hiring won't be immediate, firms are expecting to fill many compliance slots over the next several months.
Related: How to Get a Job in Compliance
Who's Hiring: Smaller Banks
Community banks have had to report to the government since before Dodd-Frank, so they already have some compliance staff. Still, as agencies submit their proposals for new regulations, smaller banks are gearing up for compliance expansion. Of the nearly 8,000 community banks in the U.S., 91% have assets under $1 billion and 36% have assets under $100 million. Those smaller banks may not have enough people on board and will have to hire accordingly.
"We expect there will be additional burdens attendant on community banks and they may have to increase the [number of] employees devoted to compliance," said Karen Thomas, senior executive vice president for government relations and public policy at the Independent Community Bankers of America.
Who's Hiring: PE Firms
All PE firms with more than $150 million AUM must now register with the SEC, except in certain circumstances. Once registered, firms must maintain records for each managed fund. Firms will have to document AUM, use of leverage, counterparty credit risk exposure and types of assets.
Before Dodd-Frank, most of private equity industry was exempt from registering with SEC, with the exception of the largest PE firms -- the Carlyles and KKRs of the world.
According to figures provided by the Private Equity Growth Capital Council, firms with more than $150 million in capital comprise 41% of all PE firms (about 1600 in total that don't focus on venture capital). In other words, hundreds of firms will have to register with and report to the SEC, and will need armies of compliance officers to help them do it.
Who's Hiring: Hedge Funds
Hedge funds face comparable rules. If a private advisor manages more than $100 million in assets, it will now have to register with the SEC, maintain records and file reports. In Q2 2010, there were 6,982 hedge funds, according to a report by Hedge Fund Research, Inc., a Chicago-based hedge fund research company. A source familiar with the matter said around 50% of the industry registered before Dodd-Frank. That leaves thousands of firms that still need to follow suit.
Funds may also need to register with the National Futures Association as a commodity pool operator if the fund "buys commodities and currently rel[ies] on an exemption based on margin and notional exposure percentage limitations," according to the bill.
Not Hiring: The Big Banks
Many larger banks already have most of the headcount they'll need when it comes to ramping up for Dodd-Frank. For example, both Deutsche Bank and Fifth Third Bank aren't looking for compliance people, their spokespeople said.
"We've tried to be as anticipatory as possible," said Fifth Third Bank's chief risk officer Mary Tuuk. "We've already got the right people in place."
Because most bigger institutions won't find themselves in "reactive positions," as Tuuk put it, the brunt of hiring will fall to smaller banks and PE firms and hedge funds that haven't had to deal with filing and reporting to federal agencies.
The Hiring Timeline
Don't drop off your resume at the nearest community bank just yet. Institutions are "moving slowly and cautiously with a very critical eye," said Gail Hodes, director, USA, at Compliance Recruitment Solutions, a recruiting firm specializing in compliance officers. "It's still a client-driven market, not a candidate-driven market."
What that means is that though firms are on the prowl, they can still afford to take their time. The registration deadline for PE firms and hedge funds for example, isn't until July 21, 2011.
Hodes said she's received an increase in demand for talented compliance officers, but "not an overwhelming increase. Things are still moving slowly. We're seeing multiple rounds of interviews -- five or six for a position."
Jack Kelly, managing director at Compliance Search Group, agreed. "It's going to be progressive, rolling hiring," he said. "Once regulators start interpreting the act and how to enforce it, firms will have a better idea of what they need. We're not at a stage where firms are saying 'hey, I don't care, we need to hire.' They're waiting to find out exactly what they'll need to do."
At Park National Bank, a large community bank based in Ohio, chief financial officer John Kozak is bracing for more hiring, but not quite yet. The bank currently has three full time employees devoted to compliance and also employs a few others on a part-time basis.
"We might need another person as more regulations come out," Kozak said. "But right now, we're on the fence. If we were much smaller, I think this regulation could be a really hard ship."
If you're an aspiring compliance officer, now is to begin polishing your resume and reaching out to contacts to who's going to need what. These next few months are the calm before the storm, said Chad Champion, a senior recruiter at the Mergis Group, a national recruiting firm. "We have not seen the full surge in compliance. You don't really see a lot of hiring near the end of the year, so we're expecting to see a lot more next year."
Write to Julie Steinberg
Related: How to Get a Job in Compliance