The Blog Of The Securities Industry Professional Association


The election process to name a small firm Governor has begun and despite what some may think, the SIPA could not be happier to see such a wide range of potential candidates asking to be considered. Although we do not agree on all issues, we do believe the membership will be better served by having candidates who want to be on the board and who are forced to ask members to sign a petition on their behalf. When FINRA announced two months ago that there would no longer be a nominating committee for available seats, we viewed that as one of the most positive developments to come out of FINRA in quite a long time. The fact that members of SIPA were the driving force behind the last few elections was also a factor in that decision. There is little doubt that if SIPA were to publicly back one candidate over another it would affect the election outcome, however members have spoken and there is no a complete consensus on which particular candidate should be endorsed, thus we have decided to stay out of this election and let members decide their fate and their candidate.

If you were paying attention you certainly noticed we used the word fate and in this economic environment your fate as a small firm has never been in greater doubt. Last week I was engaged in some friendly chat with another dissident leader/founder and we lamented the fact that the number of small broker dealers was down to 4500 firms since a high of about 6000 a few years ago. Later in the day, FINRA came out with the election notice and this is their exact words:

As of close of business on Monday, May 2, 2011, the number of FINRA Small Firms was

4,189 and the number of Large Firms was 173

Our jaws hit the floor with that number. By this time next year it’s conceivable that small firms will number less then 4000. The time for survival has already come and gone for many small firms and unless things change dramatically all of the small firms out there will be a captive OSJ or Branch office of a larger firm. When choosing a candidate take into account this staggering number we just quoted. Ask them what they intend to do to help stop the slaughter of small firms through excessive regulation and costly rule implementation that does little or nothing to protect the public. Ask them what rules they would change and keep the same and ask them if they know what it costs to implement the various trade reporting, AML and PCAOB audits. Lastly, any candidate that approaches you for your vote should be well versed in Private Placements and if not a red flag should go up. Private equity is one of the main engines that drove this economy and capital creation. Sadly, the private sector cannot get of the floor because small equity raises have become so complicated and so regulated that most small firms won’t even raise capital anymore. We believe that this country will never truly recover from our economic malaise until handcuffs are removed from the capital formation process. Ask potential candidates what they can do to help capital formation and make it less costly for companies and brokers to raise money.

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May 10th, 2011



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