Finra experienced an operating loss of $39.5 million in 2015, due in part to investments the regulator made to migrate data to “cloud” storage, according to its annual report posted Thursday.
The
Financial Industry Regulatory Authority Inc., the industry-funded broker-dealer regulator, had net revenue of $992.5 million and total expenses of $1.038 billion. Its financial performance was sharply lower than in 2014, when it achieved a $129 million surplus on net revenue of $996.6 million. (Net revenue is total revenue minus the activity assessment cost of revenue.)
“While we operated at a loss of approximately 4% of revenues in 2015, that loss was primarily driven by planned improvements related to our continuing efforts to migrate to the cloud, which will generate cost savings in future years, and expanding investor protection through cross-market, cross-product and options surveillances,” Finra chairman and chief executive Richard G. Ketchum,
wrote in the report.
Finra said portfolio returns were down $91.1 million, “although slightly positive and in line with benchmarks,” while fines fell $38.8 million.
The increase in expenses also was the result of an advertising campaign for BrokerCheck, an online database that contains information for investors about their brokers' professional background and disciplinary history.
Finra reported it has approximately $2.3 billion in total assets, including $2.0 billion of cash and investments.
“Finra's financial position remains strong and highly liquid,” Mr. Ketchum wrote.
In his introductory letter, Mr. Ketchum wrote that Finra brought 1,512 disciplinary actions against registered brokers and firms in 2015, levying $93.8 million in fines and ordering $96.6 million in restitution to investors — “almost three times the amount of restitution ordered in 2014.”
Mr. Ketchum was one of eight Finra executives to earn more than $1 million in salary and deferred compensation in 2015. His total compensation was $2.9 million. The next-highest-paid Finra official was executive vice president and chief financial officer Todd Diganci, who made $1.37 million.
This was the last annual report Mr. Ketchum will sign. He is retiring this summer and will be replaced as Finra chief executive by Robert W. Cook, a former division director at the Securities and Exchange Commission.
