SFAB Update

October 16, 2009

 

Dear Small Firm Member:

 

The Small Firm Advisory Board (SFAB) has met four times this year to review and comment on FINRA rule proposals. The rulebook consolidation process continues and is getting much closer to fruition. The SFAB spends considerable time discussing proposed rule changes with FINRA senior staff, especially those rules that the SFAB believes will have a greater impact on small firms. The SFAB's views and opinions regarding proposed rules are shared with the FINRA Board of Governors. In addition, the three small firm Board of Governors representatives participate in our meetings and share the small firms' perspective on rule proposals with FINRA's Board at their meetings.

 

We also encourage you to participate in FINRA's rule proposal comment process. Most FINRA rule proposals are published for public comment by the SEC, and proposals with significant changes to the current rules, are also published for comment in a FINRA Regulatory Notice. As we are all aware, in a "post-Madoff" era, there are numerous new regulations and the burden on firms has increased significantly. As small firms, it is incumbent upon us to inform policy makers at FINRA and the SEC on how proposed rules will impact our businesses.

 

Individually, members of the SFAB have continued to reach out to the SEC and members of Congress for an exemption from the requirement to use a Public Company Accounting Oversight Board registered CPA firm to audit a small non-public introducing broker-dealer. Unfortunately, we have not yet been successful in obtaining any relief for the small firm. As we stated in our letter to small firms earlier this year, loss of the PCAOB exemption in December 2008 was a decision made by the SEC and not FINRA.

 

As most of you are aware, FINRA is proposing to increase its assessment fees. As a "self-regulatory organization" FINRA is not funded by the government and is required by the SEC to cover its operating costs by appropriate assessments. We have been told by FINRA that the increased assessment fee proposal continues to recognize the correlation between the cost of FINRA's exam program and the number of persons registered with a firm, and as a result larger firms are bearing the major part of these fee increases. Nonetheless, if FINRA's rule proposal is approved, the cost of doing business will increase for all firms.

 

FINRA has previously announced that it will be expanding those securities included in TRACE reporting. Although TRACE is here to stay, FINRA representatives met with a number of firms, including several small firms to better understand the implications of these changes to the members.

 

FINRA has asked the SFAB to participate in discussions centered on firm segmentation and how FINRA can collect and utilize more relevant firm data to improve its regulatory program. The SFAB looks forward to these discussions and providing our input.

 

The election for two open seats on the SFAB from the North and West Regions will take place shortly. Voting will commence about October 23rd. If your firm is located in the North or West regions, please make sure you vote.

 

Please feel free to contact any of the undersigned members of the SFAB.

 

Robert Muh (Chair)

Mari Buechner (Ex-Officio)
Deborah Castiglioni (Midwest Region)
James Jones
Carolyn May (South Region)
Neal Nakagiri
Daniel Roberts (West Region)
Lisa Roth
Raymond Smith
Howard Spindel (New York Region)
Donald Steel (Ex-Officio)
Duncan Williams (Ex-Officio)