The U.S. Securities & Exchange Commission is putting information technology at the core of its transformation into a more proactive, efficient and effective regulatory body, says TowerGroup in a new research report.

“After being starved of funds and leadership for many years, the SEC’s IT department has a new CIO at the helm and several significant new projects already underway,” said Dushyant Shahrawat, senior analyst in the Securities & Capital Markets practice at TowerGroup and author of the research. “The SEC’s IT budget for 2005 is US$113 million, over 2.5 times its level in 2002.”

Shahrawat noted that in the context of this change – and the fact that IT now accounts for 13% of the total SEC budget – the new CIO’s challenge will be to create the functional controls, infrastructure and managerial culture required to manage this fast-growing scale of technology resource. The SEC’s 2005 technology budget will be spent across four key areas: upgrading technology infrastructure; developing new applications; managing data more efficiently; and expanding analytical capability.

The report also suggests that the significant level of technology investment, as well as other changes being made at the SEC, will benefit industry participants in numerous ways, including: greater access to public and regulatory information; more collaborative rulemaking; better industry-wide risk management; and a simplified corporate filings process.

TowerGroup also asserts that rise in spending will have a considerable ripple-effect in driving greater institutional spending on compliance.

“In the short-term, we believe that for each additional budget dollar that the SEC spends on internal IT efforts, the industry will spend five dollars to ensure better compliance amidst a stricter regulatory environment,” said Shahrawat. “Yet over the longer-term, these changes should eventually reduce the regulatory burden on the securities industry, by simplifying data needs and inspection procedures. Smarter firms should regard the SEC’s transformation as an opportunity to rethink and streamline their own compliance operations and supporting IT architecture.”