FINRA Plans Fee Increases Amid Rising Costs and Losses
From the desk of Jim Eccleston at Eccleston Law
The Financial Industry Regulatory Authority (FINRA) has announced plans to raise fees for its approximately 3,300 broker-dealer member firms. According to AdvisorHub, the self-regulator faces soaring costs, as detailed in its annual report published at the end of June.
In 2023, FINRA reported a net operating loss of $119.1 million, nearly doubling its $60.2 million loss from 2022. The organization attributed the increased expenses to a multi-year effort, initiated in 2020, aimed at investing in staff and technology to bolster its supervisory capabilities. These investments led to a $155 million rise in expenses last year.
Compensation and benefit costs saw a significant increase, rising by 12 percent to $981 million, primarily due to a net increase of 300 employees, bringing FINRA's total headcount to 4,200 at the end of 2023. Executive compensation also saw notable changes, with CEO Robert Cook's pay rising 4 percent to nearly $3.84 million and his incentive compensation for 2024 increased to $2.37 million. Other executives, including Chief Information Officer Steven J. Randich and Chief Legal Officer Robert L.D. Colby, also received substantial raises.
To manage those rising costs, FINRA has implemented measures such as controlling wages and offering buyouts to veteran corporate staff. Additionally, the organization tapped into its $1.7 billion investment portfolio to cover some of the increased expenses. However, FINRA anticipates that its costs will continue to outpace revenue increases for several years.
AdvisorHub shared that FINRA has faced bipartisan scrutiny from lawmakers over its resource allocation and skepticism from former regulatory lawyers regarding declines in enforcement. In 2023, FINRA levied $88.4 million in fines, up by $33.9 million from the previous year. It also ordered firms to pay $7.5 million in restitution to harmed investors, expelled five firms, barred 178 advisors, and suspended 257 advisors.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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