July 20, 2012
I am writing to oppose the FINRA fee increase proposal.
I run a small broker-dealer. I employ five registered representatives, and another seven people in admin/support roles. We provide M&A advisory services to companies. We are barely breaking even right now. Most of my competitors in the M&A arena simply choose not to be registered with FINRA, because of the cost, burden, and perceived irrelevance. In effect, FINRA is punishing the good companies, like mine, that provide full compliance. If you think about it, FINRA is actually my largest fixed cost as a firm! When you factor in all expenses, including the need for audits, the need for a chief compliance officer (even though we don't handle money - we just provide advice to companies), and the fully-loaded cost, the total cost is absurd. This "penalty for good companies" is only increasing. FINRA proposals like SR-FINRA-2012-031 will only serve to make this worse.
In addition, FINRA's most recent financial report also disclosed that the average per employee compensation expenses for 2011 were $174,000. A staggering figure given that the total membership of FINRA has declined by some 11% since 2007. The imposition of new fees without addressing the significant lack of fiscal discipline by FINRA would simply serve to ratify the financially irresponsible manner is which FINRA is currently being operated. Based upon the recent GAO Report criticizing the SEC's oversight of FINRA (Opportunities Exist to Improve SEC's Oversight of the Financial Industry Regulatory Authority, GAO-12-625, May 30, 2012) we encourage the SEC to exercise it authority to deny the proposal and require FINRA to submit a financial plan to operate within its existing resources.
The proposed fee increase would have a detrimental effect on existing small firms, numbering approximately 4300 of FINRA's total membership of 5000. The fees imposed on small firms for any Change of Membership application would have a detrimental effect on small firms seeking to raise capital for expansion, expand, acquire or merge. Given the dramatic decrease in the number of firms, the imposition of significant additional fees would have a detrimental impact on small firms. Small firms provide the bulk of capital formation for small businesses in the U.S. and service a significant number of small investors.
In lieu of the imposition of a fee for any Change of Membership Application and if the proposal is not denied, we are recommending that the SEC consider granting a waiver for any CMA submitted by a small firm once every two years. By waiving the fee for small firms, it would remove a significant barrier to the continued growth and expansion of small firms.
Additionally, the imposition of a fee for a New Member Application will have a significant impact on the creation of new member firms at a time when the clearly stated Congressional intent is to eliminate obstacles to capital formation for small business.
Please oppose this onerous proposal.
Regards, Ben
Benjamin Gordon
Managing Partner
BG Strategic Advisors
525 South Flagler Drive
Suite 200
West Palm Beach, FL 33401