increases “that best yielded an equitable
overall fee increase across member firm
size and type.”
The fee hikes will impact five areas:
the Gross Income Assessment, Trading
Activity Fee, Personnel Assessment, reg-
istration and qualification examination
fees phased in over a three-year period
beginning in 2022.
FINRA CEO Robert Cook explainedin FINRA’s 2019 annualreport that FINRA was“preparing a proposal toraise regulatory fees.” Theself regulator has usedsome $650 million of itsreserves since 2010.
Cook explained theplanned changes to broker-dealers in a letter.
The fee increases thatare the subject of FINRA’splan will be phased ingradually, with full implementation in 2024, to allow FINRAmembers sufficient time to plan forsuch fee increases, the self-regulatorexplained.
Despite increasing responsibilities,FINRA notes that it has not increasedits core regulatory fees materially since2010 and has not raised these fees at allsince 2013.
FINRA has relied on its financialreserves, which originally derived fromthe sale of Nasdaq, to help support itsregulatory mission.
From 2010 through 2019, FINRAexplains, it used over $600 million ofits financial reserves to fund operatinglosses and defer fee increases.
“On average, this support fromFINRA’s financial reserves amounted to6.6% of FINRA’s operating budget peryear,” FINRA said.
FINRA states that its plan propos-
SEC FINES BD ON TEXT SNAFUS
es “a proportional increase to fees it
relies on to substantially fund its regu-
latory mission in a manner that pre-
serves equitable fee allocation among
“FINRA is targeting the proposed
fee increases to generate an additional
$225 million annually once fully imple-
mented in 2024. This targeted revenue
amount is calculated to bring FINRA’s
revenues in line with its anticipated
costs, based on FINRA’s projected rev-
enue and costs.”
In other regulatory news, a case leviedagainst a BD for text messaging clients highlights the importance of recentguidance issued by the Securities andExchange Commission.
The securities regulator recentlysettled charges against JonesTradingInstitutional Services LLC, a registeredBD based in California, for failing to preserve business-related text messages sentor received by several of its registeredreps on their personal devices whencommunicating with each other, withfirm customers and with third parties.
The text messages concerned, amongother things, the size of orders, the timing of trades and the pricing of certainsecurities, according to the order.
“Some of the messages were respon-
sive to a request for records made to
the firm by SEC staff in an unrelated
investigation, but, because the respon-
sive text messages were not retained on
Jones Trading’s firm-sponsored systems,
Jones Trading failed to produce the rel-
evant text messages to the staff,” the
Iain Duke-Richardet, compliancestrategy principal at Hearsay Systems,
told Investment Advisor in an email
that the action against JonesTrading
“shows that the Commission is acting
consistently with its guidance regarding
the appropriate use of electronic com-
munications,” which was
released in mid-August.
managers and investment
advisors “should be care-
fully looking at their poli-
cies regarding permitted
and in particular at the
testing being conducted to
validate adherence to com-
pany standards,” Duke-
Hearsay recently report-
ed that the uptick in the use of social
media and text messaging was signifi-
cant, with Hearsay observing a 300%
spike in digital communications since
the onset of the coronavirus pandemic.
The SEC order further found that
JonesTrading’s senior management
were among those sending and receiv-
ing business-related text messages that
were not retained by the firm.
JonesTrading was charged with violating the recordkeeping provisions ofSection 17(a) of the Securities ExchangeAct of 1934 and Rule 17a- 4 thereunder.The firm, without admitting or denyingthe findings, agreed to cease and desistfrom committing or causing any violationsof those provisions, to be censured and topay a civil penalty of $100,000.
Ginger Szala is managing editor ofInvestment Advisor Group. She can bereached at email@example.com. WashingtonBureau Chief Melanie Waddell can bereached at firstname.lastname@example.org.
FINRA states that its plan
proposes “a proportional
increase to fees it relies on to
substantially fund its regulatory
mission in a manner that
preserves equitable fee allocation
among FINRA members.”