Given your substantial experience in private equity, where significant earnings and bonuses, plus the chance of substantial long-term income via carried interest are norms, would you ever consider leaving the lucrative buy-side to work for a regulatory body? It may interest you to know that increasingly, financial regulators in Asia, the UK, and the US are seeking private equity specialists, as they deepen their scrutiny of this sector. Evidence suggests that these regulators are even prepared to push against their usual strict salary guidelines to secure such experts.
A study conducted by Kinetic Partners, published towards the end of November 2014, revealed a remarkable uptick in annual spending by regulatory bodies such as the Securities and Exchange Commission (SEC), which saw a 62% rise over the last six years. Additionally, spending by the UK’s Financial Conduct Authority (previously the Financial Services Authority) jumped by 50%, while the Securities and Futures Commission of Hong Kong saw an astounding 120% rise. These increases were highlighted in the Global Enforcement Review.
The report made the following assertion, “Although there has been a general increase in these regulatory bodies’ workforce, the proportional increase is relatively lower, suggesting a recruitment focus on hiring high-caliber professionals commanding higher pay.”
In fact, just this year, the FCA recruited two senior investment bankers to bolster its wholesale enforcement division. James Kelly, formerly a Managing Director at Goldman Sachs, joined the FCA as an advisor in February, followed by Gunner Burkhart, who previously worked as a Managing Director at Lehman Brothers, in a comparable role in April. Recently, the trend seems to have shifted towards securing more private equity expertise. Andrew Bowden, Director of the SEC’s Office of Compliance and Inspections, mentioned their intention to form a team of evaluators focused particularly on advisers to private funds.
So, how does the SEC manage to attract these experts? While the Kinetic study indicates rising expenses, both the FCA and the SEC insists they remain committed to their distinct salary structures for all staff. The highest salary at the SEC is capped at $243.4K, while managers at the FCA reportedly can earn up to $315K. Although these figures pale when compared to the average private equity compensation of $1.3 million, it could be argued that the real value of working with regulatory bodies is not just monetary. Working at regulators proposes a more predictable career trajectory, superior long-term job security, and a unique opportunity to shape policies. This goes to show that personal satisfaction, in some cases, may trump financial gains.
