No surprise — the brokerage industry is blasting a series of fee hikes announced in June by the
Financial Industry Regulatory Authority Inc.
The Financial Services Institute Inc. issued a statement Monday saying the higher fees will hurt small firms the most — and limit investor access to advice.
The hikes are slated to kick in this month.
"Smaller firms feel the impact disproportionally, and that's one of the many reasons why we oppose the fee increases," Dale Brown, FSI's chief executive, said in an interview.
The fee hike proposals were filed in June with the Securities and Exchange Commission under a process that provides for immediate approval. The SEC took comments through last Thursday, though, and still could suspend and disapprove the hikes.
The FSI and other industry interests urged the SEC to revoke the hikes. Given the financial strains independent firms face, the hikes "will result in additional [independent-contractor] firm failures," the FSI wrote last week in a comment letter.
Several groups said Finra failed to justify its fee increases when it filed with the SEC.
Finra should provide an "explanation of the analysis of how current budgets and costs were reviewed in order [to] find additional funding, [or cut] outdated or unnecessary Finra programs," The Committee of Annuity Insurers wrote.
"Unfortunately, the descriptions from Finra … indicate little or no evidence of the consideration of any options that Finra contemplated beyond simply moving directly to a determination to raise the fees," said the committee, which represents a group of insurance companies.
Likewise, the Investment Company Institute said Finra's arguments for higher advertising-review fees were "illogical." Finra claimed that the higher costs were needed due to a higher volume of reviews, the ICI wrote, but Finra's existing per-filing charge should have led to "increased efficiencies or economies of scale as a result this volume," the ICI said.
"A more plausible explanation for the fee increase appears to be … Finra's overall budget shortfall, which was caused in part by declining overall regulatory fees and also by a decline in Finra's investment returns," the ICI said.
Finra spokesman George Smaragdis declined to comment.
In its filing last month, Finra said its fees haven't been hiked in years and that higher levies are needed to cover the increased costs of regulating a more complex business. But the FSI noted in its letter that the SEC approved an increase in Finra's personnel- and gross-income assessments in November 2009.
"Finra argued at the time that the proposed fee increases … would 'stabilize its revenues and provide protection against future industry downturns,'" the FSI said. "Unfortunately, neither of these statements proved true."
Higher fees couldn't come at a worse time, the FSI said. In its letter, the group noted that firms face "astronomical increases in [Securities Investor Protection Corp.] assessments, SEC fees, fidelity bond premiums, errors-and-omissions-insurance premiums and significant uncertainty concerning the financial markets and …regulatory requirements."
