Finra Proposes Fee Increases Starting in 2025

The Financial Industry Regulatory Authority is seeking to raise member fees to help keep pace with the rapidly increasing cost of overseeing the brokerage industry, according to a proposal filed with the Securities and Exchange Commission on Tuesday. 

Finra will implement the hikes in phases between 2025 and 2029 and ultimately increase its annual fee revenue by $450 million. The industry’s self-regulator estimated that total fees will increase at a compound annual growth rate of 5.3% over that period, although some of those costs, such as trading activity fees, are passed along to customers. 

“FINRA’s financial projections indicate that in coming years necessary expenditures will outpace revenues, despite our continuous efforts to prudently manage our expenses and deploy our financial reserves,” Finra Board Chair Eric Noll, Finance Committee Chair Scott A. Curtis and Chief Executive Robert Cook wrote in a letter posted on the regulator’s website. 

Finra last implemented fee increases in 2022 as part of a plan to fund its operations through this year with an additional $225 million in revenue. It warned of higher fees in its annual report in July as it reported a net operating loss of $119 million in 2023, double a $60 million loss from the previous year. Finra projected it will report another annual loss in 2024 even after a drawdown of $100 million from its reserves. 

The rising expenses are largely tied to rising wages and accelerated hiring to meet broadening enforcement mandates as well as increases in technology expenditures such as cybersecurity and data storage, Finra wrote in the filing. Enforcement of new SEC mandates, including Regulation Best Interest, have required “substantial investments,” according to the filing.

Finra has sought to reduce costs by closing five offices, implementing staff buyouts and hiring a consultant to assess efficiency across its operations, it said. Its expenses have been growing at a slower pace than its member firms, the filing noted. 

The increases will apply to a range of fees including those for membership, qualification exams, arbitration and other services. Some fees, such as a routine charge per branch office, will be increasing for the first time since 2013. 

Registration fees will be increasing in 2028. It will cost firms $175 to file to transfer the license of a broker they have hired, for example, up from $125 currently. The cost to file a U5 termination notice will increase to $70 from $50. 

The fee increases will affect firms proportionally based on size. Large firms with over 500 brokers will likely be paying $415,000 in additional fees by 2029, according to the filing. Smaller firms with 10 to 150 brokers will see fees increase by around $4,135 over the next five years. 

Finra said that assuming the growth rate of the prior 10 years continues, membership fees will comprise around 0.31% of revenues from all its members. That is consistent with the historical average of around 0.30%, the regulator said. 

Finra oversees almost 630,000 registered individuals and 3,300 member firms. It must obtain SEC approval before implementing the new fee schedule.

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