Finra small-firm board candidates unload on SRO

Attack executive salaries, fee increases and call for budget cuts

Aug 9, 2012 @ 12:49 pm

By Dan Jamieson

Finra board election
+ Zoom

As the Finra board election campaign nears a conclusion, three candidates for an open small-firm seat are making issues of Finra's weak financial condition, its executive salaries, a recent fee increase and efforts to get jurisdiction over investment advisers.

Candidates will be soliciting votes until the Financial Industry Regulatory Authority Inc.'s annual meeting Monday, when final tallies will be counted.

The winner will fill one of three Finra board seats reserved for firms with no more than 150 registered persons. Finra's 21-person board has seven elected industry representatives.

The three small-firm candidates, Kevin Carreno, part owner and general counsel of International Assets Advisory LLC in Orlando, Fla., Stephen Kohn, president of Stephen A. Kohn & Associates Ltd. in Lakewood, Colo., and Dock David Treece, a partner at Toledo, Ohio-based Treece Financial Services Corp., agree that Finra needs to get its fiscal house in order.

Finra lost $84 million last year, and then imposed "the biggest fee increase in history. I couldn't run my business that way," said Mr. Carreno, who wants member firms to have a say on Finra's executive compensation.

Mr. Treece thinks pay should be benchmarked against that of government regulators, not private industry. "I don't know any other organizations that pay bonuses when a company loses money," he said, noting that incentive pay is a major component of Finra executives' compensation.

Mr. Kohn also took issue with Finra salaries. "If membership is down 20%, why aren't expenses down 20%, including salaries?" Mr. Kohn asked. "Why are bonuses being paid?"

"Cutting expenses is looking at everything," he said. "You can't just look at one [budget] item. It all has to be looked at very carefully."

Exams are too long and costly for small firms, Mr. Treece said.

"A big expense is examining all these small firms," he said. "They should scale that back."

Mr. Kohn is worried that a new fee for getting business expansions approved by Finra will make the process more arduous.

"Every time I turn around, I'm writing a check for something," he said.

Mr. Carreno complained that the fee increases, which began going into effect last month, got a "rubber stamp" from the SEC. Fee hikes "ought to be approved by members," he said.

Only Mr. Kohn supports Finra's taking on some oversight of advisers.

Setting up a new self-regulatory organization would be too costly, and the SEC is not in a position to take on more adviser exams, he said.

Overseeing advisers would be a "disaster” for Finra, Mr. Carreno said. “Congress should authorize and fund a competing SRO."

"The perception I get is the [Finra] board seems to think [a bill setting up Finra as an adviser SRO is] going to skate on by," Mr. Treece said. The proposal has garnered more opposition than anticipated.

Finra spokeswoman Nancy Condon declined to comment.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Consuelo Mack WealthTrack

Ariel Investments' John Rogers: How to survive difficult markets

Ariel Investments founder, CEO and CIO John Rogers, Jr. discusses how thinking long term, particularly as a value investor, can help boost your confidence when the markets are working against you.

Latest news & opinion

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.

Morgan Stanley says recruiting and attrition have slowed down

If wirehouses can successfully reduce their reliance on signing bonuses to recruit brokers, they could increase profits.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print