Finra turns a profit, helped by investments, fee increases

Operating loss remains stiff at $89.2M, slightly better than in 2011

Jun 28, 2013 @ 5:14 pm

By Dan Jamieson

The Financial Industry regulatory Authority Inc. eked out a profit of $10.5 million last year, reversing an $84 million loss from 2011 with the help of fee increases, cost cutting and improved investment returns from its $1.6 billion portfolio.

“Financially, 2012 was a solid year,” said chief executive Richard Ketchum in Finra's annual report, released late today. "Our improved results reflect the fee increases we implemented during the year as well as our efforts to control costs.”

Still, on an operating basis, the organization lost $89.2 million last year, a slight improvement from the $89.8 million operating loss posted in 2011.

A year ago, as a result of the ongoing losses from lower regulatory fees and higher costs from its NYSE integration, Finra announced a series of fee increases for member firms.

Those fee hikes are now “expected to yield nearly $60 million in annual incremental revenues and better position FINRA financially for the next few years,” Mr. Ketchum wrote.

Finra cut costs by $25 million last year, and expects to achieve another $12 million to $15 million in cost savings this year.

Mr. Ketchum's own pay fell 2% last year, to a total of $2,629,705, compared with 2011. His salary held steady at $1 million and his bonus rose to $1.25 million from $1.2 million in 2011. His deferred compensation declined last year to $340,201 from $451,174 in 2011.

Todd Diganci, chief financial officer and the second-highest paid Finra executive, took home a total of $1,246,523 last year, up 2% from 2011. Robert Colby, who joined Finra a year ago in June as chief legal officer, was paid $259,615 in salary last year, and received a bonus of $300,000 for 2012 that was paid early this year.

Mr. Colby's annual base salary is $500,000, the same as Mr. Diganci's.

Finra's net revenues in 2012, at $878.6 million, were flat from the prior year. Decreases in dispute-resolution fees and lower fine revenue offset the gains from higher member-firm fees. But gains of $59.1 million on its investment portfolio put the organization into the black.

Finra dramatically reduced risk in its portfolio following huge losses after the financial crisis in 2008. As of year-end, 63% of its investment assets were allocated to high-quality bonds and cash, 20% in equities, and 13% in alternatives.

On the enforcement end, Finra brought 1,541 disciplinary actions against registered representatives and firms last year, levying fines of more than $69 million and restitution of $34 million, the report said.

The regulator also expelled 30 firms, barred 294 individuals and suspended 549 brokers.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

What makes now an ideal time to talk about philanthropy?

With the end of the year approaching, advisers need to be thinking about charitable giving. Schwab's Kim Laughton and JMG's Melissa Walsh discuss some new opportunities to consider.

Latest news & opinion

Nontraded BDC sales in worst year since 2010

The illiquid product's three-year decline is partially due to new regulations and poor performance.

Tax reform debate sparks fresh interest in donor-advised funds

Schwab reports new accounts up 50% from last year, assets up 33%.

Nontraded REITs to post worst sales since 2002

The industry is on track to raise just $4.4 billion, well off the $19.6 billion it raised just four years ago, as new regulations hinder sales.

Broker protocol for recruiting a boon for clients

New research finds advisers whose firms have joined the agreement take better care of customers.

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print