FINRA Wants to Hike Member Fees Beginning in 2025
The Financial Industry Regulatory Authority (FINRA) is proposing to increase broker-dealer fees, citing rising regulatory costs. The US industry self-regulatory organization (SRO) intends to phase in the rise between 2025 and 2029, which is expected to raise fees at a compound annualized growth rate of 5.3%.
The proposed fee increase, pending approval from the Securities and Exchange Commission, arises as the non-profit SRO anticipates that its expenses would exceed revenues in the forthcoming years due to increasing labor expenses and enhanced technological requirements. Furthermore, FINRA’s regulatory jurisdiction has broadened.
“New investment products, services, and trading venues continue to emerge, and trading volumes and participation in the markets remain at historic highs,” the SRO said. “These developments — while reflecting positively on the innovation and vibrancy of our capital markets — have added to the scope of FINRA’s responsibilities, even as its other long-standing and important regulatory obligations remain undiminished.”
Although FINRA has utilized its strategic reserve to prevent fee increases in previous years, amounting to approximately $400 million from 2013 to 2023, it currently anticipates that these reserves will be insufficient to cover the projected disparity between revenues and expenses in the forthcoming years.
“With the planned fee increase, the reserves are expected to be at their targeted level in 2029 and our anticipated operating budget will be evenly balanced, with expected revenues approximating expected expenditures,” the SRO said.
FINRA calculated that for large firms, with a minimum of 500 representatives, the median rise in yearly fees by 2029 would be $415,000.
For mid-sized firms (150 to 500 representatives), fees will increase by $82,500; for smaller firms (10 to 150 representatives), the increase will be $4,135; and for firms with fewer than 10 representatives, the annual increase will be $625.
The SRO stated that the actual increase in fees paid by firms could be smaller — between 3% and 4% — because many firms pass on some of their FINRA fees to their representatives and/or clients.
FINRA anticipated that its fees will be approximately 0.31% of firms’ total revenues after the increase is fully phased in, which is generally consistent with the historical average.
Finra oversees almost 630,000 registered individuals and 3,300 member firms.
