Regulators Hiring Private Equity Expertise from Within the Industry

As a senior private equity professional who is habituated to generous remunerations and bonuses along with the all important potential of earning huge long-term incomes through carried interest, would you still choose to quit the buy-side to join a regulator?

The good news is that financial regulators within Asia, UK and the United States are now increasingly choosing to hire private equity experts since they have started scrutinizing this sector a lot more. Research says that to retain these experts, they are also willing to break conventions and stretch their rather stringent salary brackets.

Increasing Annual Expenditure A research conducted by Kinetic Partners that was released in the end of November 2014 stated that the annual expenditures by the Securities and Exchange Commission have gone up by 62% over the last 6 years. Furthermore, the expenditures made by UK’s Financial Conduct Authority (formerly known as the Financial Services Authority) went up by 50% and the Securities and Futures Commission of Hong Kong escalated their annual expenditures by a whopping 120%. This research was conducted as a part of the annual Global Enforcement Review.

The report stated that, “Staff numbers at these regulators, however, generally rose by a lower percentage leading us to surmise that they are recruiting a higher caliber of professional and that these industry specialists are being paid commensurately more.”

Hiring Expertise This year alone, the FCA named two former senior investment bankers for its wholesale enforcement division. Earlier this year in February, James Kelly, the former Managing Director of Goldman Sachs joined FCA in the capacity of an adviser and in April, former MD of Lehman Brothers, Gunner Burkhart joined in a similar role.

More recently, the priorities have shifted towards attracting more private equity expertise. Director, Office of Compliance and Inspections at the SEC, Andrew Bowden said that they have been “forming a special unit of examiners, who will focus on examinations of advisers to private funds”.

How did the SEC Manage to Attract this Talent? While Kinetic suggests that the expenses are on a rise, both FCA and SEC maintain that they continue to adhere to the stringent salary bands for all their employees. A senior officer at the SEC earns no more than $243.4K while it’s believed that the salary bands for regulatory managers at the FSA were up to $315K. While these salaries aren’t typically prudent when compared to the average compensation of $1.3 million, this seems like a small change.

Benefits of Working with a Regulator It is believed that the benefits of working with regulators lie elsewhere. For starters, it is a more structured career path providing long-term job security and a chance to contribute to making polices.