Zacks_Analysts' Blog : Schwab Wraps Up Compliance11 Deal - Analyst Blog

On Wednesday, Charles Schwab Corp. (SCHW) completed the acquisition of Compliance11 Inc. The company had announced the deal back in October. Financial terms of the pact remained confidential even after the closure.

Chicago-based Compliance11 is a leading provider of cloud-based compliance automation software for public companies, brokerage firms, hedge funds, investment advisors, private equity firms and pension funds. The firm also offers a wide range of compliance tools that assist in managing disclosure, tracking, surveillance and reporting needs.

Schwab has integrated Compliance11 with its Designated Brokerage Services (DBS) business. For more than 15 years, DBS has been offering employee trade monitoring services to employers in regulated industries. Presently, the unit serves about 650 corporate relationships with nearly $30 billion in assets for 130,000 employee accounts. Additionally, DBS provides all the products and services that Schwab offers.

Given the ever-increasing number of companies examining their employees’ investment and trading activities to ensure compliance with industry regulations, the addition of Compliance11 to the Schwab suite will expand its services to corporate clients. Schwab’s DBS clients will also benefit from one-stop solutions that expedite the process of monitoring and provide better reporting tools.

Schwab is presently on an acquisition spree. Earlier in September, the company closed the optionsXpress Holdings Inc. buyout for $1.0 billion. This deal was similar to Schwab’s peer TD AMERITRADE Holding Corporation’s (AMTD) acquisition of option brokerage Thinkorswim Group in 2009.

With the completion of both these acquisitions, we believe Schwab will reap benefits in terms of revenue improvement and market growth in its market share. Further, the Compliance11 acquisition will also give a momentum to Schwab’s strategy to expand its DBS business.

Currently, Charles Schwab retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.