Many in the small firm community believe that it is not the rules that are the problem, but how they are enforced. FINRA seems to devote too much time and too many resources examining well-intentioned firms that are devoid of customer complaints, and whose behavior is unlikely to cause customer harm. FINRA struggles to apply metrics to firms in determining how to deploy regulatory efforts. Here are some simple suggestions:
Does the firm manage quality assets? If a firm's assets under management consist of high quality stocks, bonds and mutual funds, that should be taken into account. While there is no metric to apply here, it should be obvious.
Are the firm's revenues as a percentage of assets under management reasonable? Simple reference points are that brokerage accounts across the industry generate about .5% (50 basis points) of revenue to firms, and advisory accounts about 1%. If a firm's revenues depart markedly from these norms, it deserves special scrutiny.
Is a firm that has been in business for some reasonable length of time free of customer complaints? If so, that is a very telling statistic.
If a firm manages high quality assets, earns revenues that are reasonable from those assets, and has few, if any, customer complaints, there is no point in burdening that firm with endless requests for information, and citing it for insignificant process and technical violations.
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Cresap Inc. Comment On Regulatory Notice 25-06
Many in the small firm community believe that it is not the rules that are the problem, but how they are enforced. FINRA seems to devote too much time and too many resources examining well-intentioned firms that are devoid of customer complaints, and whose behavior is unlikely to cause customer harm. FINRA struggles to apply metrics to firms in determining how to deploy regulatory efforts. Here are some simple suggestions:
If a firm manages high quality assets, earns revenues that are reasonable from those assets, and has few, if any, customer complaints, there is no point in burdening that firm with endless requests for information, and citing it for insignificant process and technical violations.