Letter to Members - November 9, 2010

November 9, 2010

Dear Small Firm Member:
The Small Firm Advisory Board (SFAB) meets several times each year to review FINRA rule proposals and to comment about the impact of the proposals on small firms. During our meetings, we interact with FINRA senior staff from departments including Member Relations, Member Regulation, Member Education and Training, the Office of the Whistleblower and others. FINRA’s CEO, Rick Ketchum, regularly attends our meetings.

Members of the SFAB spend considerable time preparing for and expressing the views of small firms in these meetings, in our collective efforts to promote efficient and meaningful regulation that takes into account the composition of a small firm where appropriate. We also address issues raised by small firms across the country in an effort to respond to those concerns you bring to us for discussion.

Rule proposals we have considered in 2010 include several with potential to directly impact small firms. For instance, we considered the extent to which proposed changes to the FINRA arbitration program would affect a small firm and its clients, we evaluated the affect of proposed changes to BrokerCheck and new licensing requirements on a small firm’s registered representatives and principals, and we reviewed proposed changes to FOCUS reporting, among numerous other issues. 

In each instance, we applied our knowledge as industry professionals, our background as small business owners, our relationships and networks with other small firms, and our anecdotal experiences to impart critical and constructive views to FINRA senior staff.

There are many possible outcomes from our input at the SFAB meetings. When appropriate, and in keeping with the overall purpose and spirit of a proposed rule, it is revised to reflect small firm nuances identified by the SFAB members. We also often request that FINRA publish rule proposals in the form of a Regulatory Notice, prior to filing with the SEC. This additional comment period allows for greater industry input. Member firm responses to requests for comment issued in Regulatory Notices make a difference. Over the past year, industry comments to the rule proposals have resulted in smarter regulation by triggering amendments to filing requirements, language and scope in a manner that benefits small firms, regulators and investors alike. We strongly encourage you to take advantage of the comment process, either by submitting your written comments directly, or by contacting any SFAB members for assistance.

Although the scope and content of our meetings are confidential, our input is shared with the FINRA Board of Governors through written commentary, and through the voice of the three Small Firm Governors, who are asked to be present at our meetings.

As individuals, members of the SFAB have continued to reach out to the SEC, members of Congress, state regulators and state legislators in an effort to inform and educate these influential leaders about the impact of regulation and legislation on small firms. Issues tackled by SFAB members through their individual efforts in 2010 included the federal financial reforms culminating in the Dodd-Frank Act, placement agent regulation and legislation, controls related to high-frequency trading, amendments to Rule 12 b-1, the fiduciary standard and other issues related to broker-dealers and investment advisers.
In a recent national election, FINRA members seated their representatives on the FINRA Board of Governors. Despite the high profile of the election and substantial media coverage, fewer than half of all small firm executive representatives cast a ballot. Since then, and going forward throughout the next several months, elections have been or will be announced for available seats on the National Adjudicatory Council, SFAB and district committees. We encourage you to participate by running for positions that interest you, or by voting for qualified candidates capable of representing your interests. 

We hope that this summary of our activities helps you to understand the role the SFAB fulfills in the rulemaking process. We invite you to contact any of us directly through links found on the Small Firm Web page of the FINRA website.

Best regards,

Lisa Roth