The Blog Of The Securities Industry Professional Association


Silver lining not seen by all

Recently some groups and supposed champions of the membership were shocked by the various fees that were increased by FINRA as a result of a large loss.  I’m not sure why you would be shocked by this when the CEO of FINRA, Rick Ketchum announced in April that there were various fee increases being discussed and that they were working to spread them out across a wide array of streams so as to not inflict too much pain.  If you are suddenly surprised in July that FINRA raised its fees, it makes me wonder if some people read anything they receive from FINRA.  The SIPA even wrote a story about the pending increases in fees and actually gave credit to FINRA for at least being open and honest about the pending increases Click here to read     I wonder if these same individuals will be shocked to learn their income taxes will most likely go up if President Obama is reelected?

Despite all this, I have taken the time to analyze the various fee increases and while nobody should be happy that fees are going up there is one area which I would consider long over due for the benefit of members.  Currently, FINRA is a membership organization that is sitting on top of one billion plus dollars from the sale of NASDAQ.  There have been some very poor investments with the money since 2005 costing members almost a billion dollars more but the fact remains that approximately 4000 small firms do have a stake in that money.  When NASD induced members to approve a merger with NYSE in 2007 they used part of these funds to pay each member $35,000.  It has always amazed me how a firm that has been a member since 1971 got the same payment as a firm approved six months before this merger.  Shouldn’t there be some skin in the game or some sort of way to earn your fair share of the pot?  The recent raising of fees for New Member Applications is a step in the right direction to rectify this.  For a top tier full service firm the new member will now have to pay almost $20,000 dollars.  This is actually still too low in our opinion when you consider that if approved the firm would have a share of a billion dollar pot that would be worth about $225,000.  Is that fair to a member firm that has been paying dues for twenty or thirty years?  We believe there shouldn’t be significant barriers to entry into the brokerage industry however a larger payment to review a new member application is the right thing to do.  Many of these applications end up being rejected and current members have to pay for the FINRA examiners to review the application and will see no financial benefit what so ever and in fact this contributes to FINRA losses.

FINRA also announced increased fees for Continuing Membership Application.  Once again, we don’t want to restrict entry into the financial field but paying FINRA $5000 to review your application to buy a firm and their stake in the pot is a drop of water in the bucket.  As with new member applications, many, many applicants attempt to buy firms each year and I can tell you first hand that the process is long and arduous and in many cases FINRA rejects the purchase.  Despite this rejection, current owners of Broker Dealers have to foot the bill to pay for the examiners to review the paperwork and the legal documents.  While nobody wants fees to increase, we believe these particular two increases have actually increased your firm’s value.  Lets criticize FINRA when they rightly deserve it but in this case they may have actually helped increase your firms worth.

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August 2nd, 2012



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