IRVINE, Calif. - Brokerage firms are struggling to find good compliance people.

"Supply is short," Ray Grenier, chief executive at Delta Equity Services Corp., a Bolton, Mass.-based broker-dealer, said about the number of available qualified compliance professionals.

A rash of new rules affecting the brokerage industry has created a huge demand for compliance pros who have sound business judgment and expertise in specific areas, industry observers said.

No longer just midlevel administrators, compliance officers now affect key business decisions.

"We're fielding more and more calls" from firms looking for knowledgeable compliance staff people, said a securities attorney at a law firm that represents many broker-dealers. The lawyer, a former staff member with NASD of Washington, asked not to be identified.

Mr. Grenier, having found recruiting from other firms difficult, has been developing compliance staff internally by hiring recentgraduates from colleges and law schools.

The strong demand for compliance people and their higher profile within firms has resulted in bigger salaries.

Pay for compliance staff members has risen an average of 30% annually for the past three to five years, said Mitch Vigeveno, president of Turning Point Inc., a Clearwater, Fla., industry recruiting firm.

"A [compliance] job that used to pay $85,000 to $95,000 is now paying $125,000," he said. "A $125,000 job is now $160,000."

Mr. Vigeveno said salaries have grown even more at the larger firms.

Based on Bureau of Labor Statistics data, the Securities Industry Association of New York and Washington estimated that the average senior level compliance officer earned about $140,000 last year, up 40% from 2001.

An SIA study released this year said that 94% of industry compliance costs are related to staffing.

Higher pay also is a reflection of the greater risk in being held accountable for mistakes, according to industry observers.

"Five years ago, [compliance people] didn't have to put their necks on the line," said Gerard Gloisten, president of GBS Financial Corp., an independent firm in Santa Rosa, Calif.

With more responsibility, compliance pros want more money, he said.

"If they don't get what they want, they go elsewhere," Mr. Gloisten said.

Mr. Gloisten said he knows of at least three broker-dealers, which he declined to name, that have gone through several compliance officers within the past few years.

Big targets

Regulators haven't been shy about going after both executives and compliance officers over alleged supervisory failures.

It isn't unusual to see compliance officers with black marks on their records, which can cause problems in their careers, Mr. Vigeveno said.

Especially troubling is the fact that compliance officers are "getting in trouble for not finding fault with their reps who were [following] recognized industry practices," said Nancy Lininger, principal of The Consortium, a Camarillo, Calif.-based compliance consulting firm.

She pointed to cases involving B shares, equity index annuities and shelf space fees.

"The advice I give to people [when considering] a chief compliance officer [position] is, 'You better be damn sure what you're getting into,'" said the industry defense lawyer. "You've got to be real careful who you join."

Adding to the risks was implementation this year of compliance tests for broker-dealers. Chief executives had to sign off on the adequacy of those tests, and chief compliance officers were responsible for doing the reviews, Ms. Lininger said.

The exercise has sparked worry about what regulators might do in response to any shortcomings that firms reported.

The growing liability has caused some compliance pros to get off the firing line by going into consulting, observers say.

Investment advisory firms haven't yet had to deal with all the rules brokerage firms face. For example, investment advisers had to verify the adequacy of their compliance procedures this year, but unlike the brokerage industry, no tests were required.

Investment advisers also don't have to have anti-money-laundering procedures, though most industry observers expect that federal regulators will eventually implement such requirements.

"We have a separate [registered investment adviser] affiliate, and [compliance] people feel a lot more comfortable on the IA side than the [broker-dealer] side, because there's less liability" working in an advisory firm, Mr. Grenier said.

More rules on the adviser side could further boost demand for compliance pros who have expertise in both the brokerage and adviser industries, observers say.