Finra's lobbying expenses down, but regulator still spends heavily to make sure its voice is heard on Capitol Hill

Finra's lobbying bill fell to its lowest point in four years in 2016, but the broker-dealer regulator still spends a hefty amount to have its voice heard on Capitol Hill. The Financial Industry Regulatory Authority Inc., the brokerage industry's self-regulatory organization, spent $670,000 on lobbying in 2016, according to reports filed with the Office of the House Clerk. That's a $150,000 decrease from 2015, when it spent $820,000, and nearly a $300,000 drop from 2012, when its total expenditure was $960,000. It spent $890,000 in 2013 and $870,000 in 2014. It's not clear why the numbers have fallen over the last four years, although in 2012, Finra was pushing hard for legislation that would have established an SRO for registered investment advisers. That measure died in the House Financial Services Committee, despite the fact that its then-chairman, former Rep. Spencer Bachus, R-Ala., wrote the bill. Depite the drop in lobbying spending, Finra recently signaled that its relationship with Capitol Hill remains a priority when it hired Gregory J. Dean as senior vice president for government affairs. Mr. Dean, who started on Jan. 30, worked in Congress for 14 years, serving as chief counsel for three Senate committees — Banking, Health Education Labor and Pensions and Budget. He last worked for the Royal Bank of Canada, where he was senior director for regulatory and government affairs. "They are very sensitive to what is happening on the Hill," said Duane Thompson, senior policy analyst at Fi360, a fiduciary training and consulting firm. "They have an ear to the ground." Finra didn't indicate what its focus was on lobbying in 2016. In its disclosure, it stated that it talked to lawmakers about "regulation of broker-dealers, securities industry and markets" as well as "investor protection and education." That's the same description it's used each year since 2013.

Unlike a trade association, such as the Securities Industry and Financial Markets Association, which spent $7.4 million on lobbying in 2016, Finra maintains a membership and functions as a regulator. Unlike the Securities and Exchange Commission, which oversees Finra but does not have industry members, Finra lobbies members of Congress. "They occupy this strange, quasi-government, quasi-private sector space," said Thaya Brook Knight, associate director of financial regulatory studies at the Cato Institute, a libertarian think tank. "Government doesn't lobby government, but Finra has these government qualities. It tends to be government when it suits its needs and private when it suits its needs." Congress appears to be increasing its scrutiny of Finra. Last week, Democrats on the Senate Banking Committee indicated interest in pursuing legislation that would direct Finra to establish a fund to pay winners of arbitration claims when losing brokerages file bankruptcy. Last year, Sen. Elizabeth Warren, D-Mass., and Sen. Tom Cotton, R-Ark., wrote to then-Finra chairman and CEO Richard Ketchum, asking him to outline specific steps Finra is taking to address broker misconduct and firms that hire a large number of brokers with disciplinary histories. "Finra is constantly going to have to prove itself in a number of ways," Mr. Thompson said. "Finra, because of its size and profile, is probably going to have a target on its back now and then."