Regulation And Legislation

Finra maintains higher spending on lobbying

Amid cost cuts, SRO spends $550K to make its case on Capitol Hill

While Finra curbs its expenses and raises member fees to stabilize its finances, one thing it hasn’t cut yet: its lobbying budget.

Over the first six months of this year, Finra spent $550,000 on lobbying, according to a disclosure report filed with Congress on Friday. Finra’s layout for lobbying is running at about the same pace as last year, when it spent $1,090,000. But that was a 25% bump from 2010, when Finra shelled out $800,000.

Although lobbying remains a small part of Finra’s overall budget of nearly $1 billion, the expenditures are symbolic, given the regulator’s continuing losses, cost cuts and a series of new fee increases.

Two candidates running for a small-firm seat on Finra’s board questioned the lobbying expenditures.

“It’s something that needs to be examined,” said Stephen Kohn, president of Stephen A. Kohn & Associates Ltd. in Lakewood, Colo.

“There is a necessity for some lobbying,” Mr. Kohn said, “but that’s a lot to be spending” given the need to cut expenses.

“Finra should not be lobbying, period,” said Dock David Treece, a partner at Toledo, Ohio-based Treece Financial Services Corp.

Finra has been lobbying lawmakers to “harmonize” the regulation of broker-dealers and investment advisers, and the implementation of the Dodd-Frank law, according to its disclosure reports.

Late last year, Finra began lobbying on the Bachus bill. Introduced in April 2012 by House Financial Services Committee Chairman Spencer Bachus, R-Ala., the bill would authorize the creation of one or more self-regulatory organizations for advisers.

Brokerage firms shouldn’t “pay for Finra to expand its power,” Mr. Treece said. “I haven’t talked to a single firm that likes the Bachus bill. That’s a million a year for something members don’t want.”

Finra spokesman George Smaragdis declined to comment.

As previously reported , last year, Finra lost $84 million, and it’s looking to cut expenses by $35 million this year on top of $25 million in cuts last year.

At the same time, Finra announced in June a series of member fee hikes, which began going into effect this month.

Some in the brokerage industry are blasting the fee increases and telling the Securities and Exchange Commission to rescind them.