SFAB Email to Small Firms

August 18, 2011

Dear Small Firm Executive Representative:

Since we last emailed you in March, the Small Firm Advisory Board (SFAB) has met twice to discuss FINRA rule proposals and raise your issues and concerns with FINRA senior executives. 

Below is an update on how FINRA has responded to many of those issues:

Suitability and know-your-customer rules. Firms told us that the effective date of the new rules would not allow them enough time to prepare to comply. In April, FINRA delayed the effective date of the new suitability and know-your-customer rules until July 2012 to allow firms time to train and educate their representatives as well as update systems and procedures.

Guidance on new rules. Firms have expressed a need for more practical guidance in preparing to comply with new suitability, know-your-customer, and reporting requirements. While there is still a need for more clarity in these areas, FINRA has answered many of your questions in Regulatory Notices 11-25 and 11-32.

SFAB communications. Firms told us they would like to hear from the SFAB directly. FINRA is hosting a small firm webinar on September 7, 2011, with two SFAB members and two FINRA senior staff members to address issues ranging from FINRA's examination program to resources available to help small firms. FINRA and the SFAB are also planning to host roundtable meetings by region to promote communication with and among small firms and the SFAB. The first meeting will take place in San Francisco on Thursday, September 22.

FINRA's committee service. Many small firm industry colleagues have asked us how they can participate on FINRA committees. This year, FINRA will use a new and more open election process for its district committee elections. There will be 12 open spots for small firm representatives to serve on a district committee. Any officer or principal of a small firm is eligible to run for these openings. FINRA will publish nomination instructions this fall. FINRA will also conduct an election this year for openings for the SFAB's South and Midwest slots.

Compliance resources. Firms have told us that they have contracted with external vendors to keep up with increased regulatory requirements. FINRA maintains a list on the Firm Gateway of compliance resources and compliance resource providers that offer price discounts (please note that these tools and resources are provided as a convenience to firms and do not represent an endorsement by FINRA). For more information, log in to the FINRA Firm Gateway at www.finra.org/firmgateway and visit the Resources section. Also, please consider encouraging the person responsible for compliance at your firm to apply for a Wharton CRCP small firm scholarship. FINRA initiated the scholarship program at the SFAB's suggestion three years ago and nine scholarships have been awarded to small firms throughout the country to date. See www.finra.org/crcpscholarship for more details.

PCAOB survey results. Many of you completed a survey providing information on your current PCAOB audit expense, versus the cost of your audits pre-PCAOB. Preliminarily, the results reinforce the assumption that the new audit requirements resulted in an increase in cost to small firms. Our next step is to begin using the results of the survey to influence the PCAOB to consider reducing or eliminating the PCAOB audit requirement for small firms.

If you have concerns or issues you would like the SFAB to consider, please let us know by sending a reply to this email. Our next meeting is on September 8, 2011, so if you have a topic you wish to raise, please reply by August 30, 2011. FINRA staff maintains the email account and collates and organizes the emails for us. If you are uncomfortable with sending the email to the FINRA account, please send it directly to me or an SFAB member by clicking on one of our names.  Please note, the SFAB cannot address FINRA examination or compliance issues that may be specific to your firm. Also, please limit your feedback to items concerning FINRA rules or issues.

Thank you for your support. We will also continue to email you twice a year to solicit suggestions and provide updates.


Deborah Castiglioni
Cutter & Company
Ballwin, MO
Chair, FINRA Small Firm Advisory Board

Small Firm Advisory Board Roster

Mark W. Cresap
Cresap, Inc.
Radnor, PA

Tina B. Maloney
Winslow, Evans & Crocker, Inc.
Boston, MA

Carolyn R. May
Simmons First Investment Group, Inc.
Little Rock, AR

Daniel W. Roberts
Roberts & Ryan Investments, Inc.
San Francisco, CA

Joseph R.V. Romano
Romano Brothers & Co.
Evanston, IL

Lisa Roth
Keystone Capital Corporation
San Diego, CA

David V. Shields
Wellington Shields & Co.
New York, NY

Raymond H. Smith Jr.
Smith, Brown and Groover, Inc.
Macon, GA

David M. Sobel
Abel/Noser Corp.
New York, NY