Update on the progress of our ongoing integration and other activities at FINRA

An Important Message from Mary Schapiro, NASD Chairman and CEO

As you know, with the creation of FINRA, 2007 marked an historic year for securities industry self-regulation. As we begin 2008, I wanted to take this opportunity to update you on the progress of our ongoing integration and fill you in on a few other activities at FINRA.

Operational Integration

We have made significant progress on this front. The transformation of FINRA's enforcement department is now complete, with the two operations fully integrated.

Our integrated exam program is also up and running. For the first time, a single self-regulatory organization will have a complete picture of the largest firms' operations—including financial, operational, risk and sales practices. We will continue our efforts to make exams more risk-based in order to best deploy our resources and to minimize the burden on firms.

We are aiming to have our full suite of technology applications for firms integrated within 24 months, with most complete within 12 months. As we continue the process of selecting the technologies that best support our new business processes, we will be sensitive to the time and effort that firms need to make system changes.

Rulebook Consolidation

One of the main benefits of the consolidation is the opportunity to establish a single FINRA rulebook. Rather than simply choosing a legacy NASD or NYSE rule, we have set out to identify rules where a more principles-based or tiered approach—which could consider a firm's size or business model—would be appropriate. We are also identifying rules that may be obsolete or duplicative of SEC requirements. We remain committed to modernizing our rulebook in ways that ensure investor protection, yet reduce unnecessary burden on firms.

New rule proposals or significant changes to rules will generally go through the committee and public comment processes. In the coming weeks, we will issue a Regulatory Notice to provide you with more details of how the process will work. We strongly encourage firms to engage in the comment process so that the new rulebook benefits from thoughtful industry participation.

Fee Restructuring

As part of our commitment to reduce firms' regulatory costs and increase efficiency, FINRA's Board of Governors has approved a plan to create a single FINRA fee structure. The new fee structure will eliminate certain duplicative NYSE registration fees for dual firms and modify the Gross Income Assessment (GIA) fee structure for all firms.

These changes, combined with our commitment last year to reduce the GIA with a $1,200 rebate each year for five years for all member firms, will result in direct savings of approximately $25 million to the industry.

You can read more about the details of the fee proposal in our recent rule filing.

Small Firm Updates

I'm pleased to announce that the FINRA Board has appointed the following at-large members of the Small Firm Advisory Board (SFAB), effective April 1:

  • Mari Buechner, Coordinated Capital Securities, Inc.
  • Lou Denton, Petersen Investments, Inc.
  • Jim Jones, Crews & Associates, Inc.
  • Bob Muh, Sutter Securities Inc.
  • Lisa Roth, Keystone Capital Corporation

You can view the full list of incoming SFAB members, including those recently elected to fill the regional vacancies, on our Web site.

Another update for small firms comes from the Small Firm Rules Impact Task Force, which has taken a close look at how existing NASD rules impact smaller firms. In its second round of recommendations, the Task Force has requested that FINRA provide small firms with additional resources to make it easier to comply with certain rules. We are taking a close look at their specific ideas and recommendations, and I look forward to updating you in future communications.

The Task Force has also made a number of recommendations, in addition to the two rule proposals announced last year, for FINRA to consider as it consolidates the NASD and NYSE rulebooks. We will take these recommendations into account throughout the process.

Like 2007, this year will be full of opportunities to continue building a more sensible and streamlined regulatory approach—and your input will be critical to our efforts. I will make sure to provide you with updates throughout the year.


Mary L. Schapiro
Chief Executive Officer, FINRA