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Finra Asks SEC to Approve Proposed Increase in Member Firms' Fees

By Alex Padalka October 6, 2020

Finra has sought the SEC's approval for an increase in fees the self-regulator charges its member firms.

The fee increase has been approved by Finra's board. The increase is split evenly across three areas that represent the bulk of Finra’s fee revenues: gross income assessment; trading activity fee; and representative-based fees, member registration fees and qualification exam fees, according to a blog post from Finra chair Eileen Murray and president and CEO Robert Cook.

Finra expects the increase to raise its fee revenue at a compounded annual growth rate of 5% between this year and 2024, representing a 2.4% CAGR increase between 2011 and 2024.

If approved by the SEC, the fee increase will take effect starting in 2022. However, Finra notes that it has received feedback from member firms that emphasized the importance of having reasonable advance notice of the increase for budgetary planning purposes. Member firms also expressed a strong preference for the increase to be phased in over a reasonable period of time, Finra adds.

Finra projects that with no increase in firm revenue over the next five years, the average firm will see a 0.06% increase in the affected fees.

To allow for a phase-in of the fee increase, Finra plans to continue drawing more than $400 million for its operations from its reserves during the phase-in period, according to the blog post.

Finra says it hasn’t increased its member firms’ core regulatory fees since 2013 and hasn’t imposed “any significant fee increase" since 2010.

Finra says its total expenses rose 16% from 2010 to 2019. During this time, Finra used more than $600 million of reserves to defer raising fees, according to the blog post.

During that same period, U.S. core inflation grew by 19%, member firms' revenues grew by 52% and member firms' expenses grew by 48%, Finra notes.

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Tags:  Fees and compensation , Regulatory/legal issues

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