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FINRA Annual Budget Summary and Financial Principles


Input from our stakeholders indicated that they would welcome greater transparency regarding FINRA's budget, especially its financial projections and potential use of fines. FINRA for many years has published an Annual Financial Report that is prepared and audited in accordance with GAAP6 that describes the prior year's finances and operations. In the interest of promoting greater transparency regarding our operations, and following FINRA360 review, FINRA in January 2018 published for the first time a summary of its budget, (see Annual Budget Summaries). In addition, FINRA also published an overview of its supporting Financial Guiding Principles.

Budget Summary

The Annual Budget Summary discusses FINRA's anticipated revenue and expenses each year. The Summary provides information on the sources and uses of revenue and illustrates budget trends over the past few years. It provides a forward-looking approach to budget information that corresponds with the lookback approach of the Annual Financial Report.

Financial Guiding Principles

FINRA also published a discussion of the financial principles that guide its financial planning and that are used to construct the budget. The Principles include an emphasis on:

  • funding FINRA's mission to protect investors and promote market integrity;
  • promoting financial transparency, building on FINRA's audited annual financial report by adding a forward-looking annual budget summary;
  • managing expenses responsibly, including employee compensation and capital initiatives;
  • maintaining reasonable member fees, increasing them only after evaluating other potential sources of funding (such as drawing down on excess reserves) and determining that expenses are appropriate to meet regulatory responsibilities;
  • using fines to promote compliance and improve markets, as well as introducing enhanced governance procedures that account separately for fine monies, limit their use to specified purposes approved by the Board of Governors or its Finance Committee, and require that they be itemized and disclosed on an annual basis; and
  • sustaining appropriate financial reserves, with a goal of maintaining reserves equal to at least one year of expenditures.

Publication of the Financial Guiding Principles and an Annual Budget Summary provides more transparency about how FINRA manages its financial resources in order to fulfill its regulatory responsibilities and further its mission.

“As a not-for-profit, self-regulatory organization whose operations are funded by industry fees—without the support of any taxpayer dollars—we must prudently manage our finances to ensure we can fund our mission to protect investors and promote market integrity in a manner that facilitates vibrant capital markets.”

— FINRA Chairman Bill Heyman and FINRA CEO Robert Cook, letter accompanying FINRA 2018 Annual Budget Summary and Financial Guiding Principles

Summary of Actions

  • Publication of the Annual Budget Summary.
  • Publication of FINRA's Financial Guiding Principles that guide the development of FINRA's budget.