Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 93709 

11 17 CFR 200.30–3(a)(12), (59). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5See FINRA’s Financial Guiding Principles, 

https://www.finra.org/sites/default/files/finra_

financial_guiding_principles_0.pdf. 

6See Securities Exchange Act Release No. 90176 

(October 14, 2020), 85 FR 66592 (October 20, 2020) 

(Notice of Filing and Immediate Effectiveness of 

File No. SR–FINRA–2020–032). 

7See supra note 6. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–27747 Filed 11–26–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101696; File No. SR– 

FINRA–2024–019] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adjust FINRA Fees To 

Provide Sustainable Funding for 

FINRA’s Regulatory Mission 

November 21, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

8, 2024, the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. FINRA 

has designated the proposed rule change 

as ‘‘establishing or changing a due, fee 

or other charge’’ under Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 

4(f)(2) thereunder,4 which renders the 

proposal effective upon receipt of this 

filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adjust FINRA 

fees to provide sustainable funding for 

FINRA’s regulatory mission. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Overview 

FINRA is submitting this proposed 

rule change to increase the revenues 

that FINRA, as a not-for-profit selfregulatory organization (‘‘SRO’’), relies 

upon to fund its regulatory mission. 

Over the past year, FINRA has publicly 

stated many times its need to file a fee 

change this year to increase its fees. 

Over the past several years, FINRA has 

experienced significant expense growth 

resulting from rising technology costs 

related to capital investments seeking 

long-term efficiency gains for both 

FINRA and the industry, rising cloud 

hosting costs, ongoing disaster recovery 

and cybersecurity requirements, and 

elevated wage inflation and essential 

headcount increases necessitated by the 

growing breadth and complexity of 

FINRA’s responsibilities. 

To sustain FINRA’s regulatory 

capabilities, FINRA proposes to increase 

fees related to FINRA’s core regulatory 

functions as well as select fees related 

to the use of FINRA programs and 

services. The proposal is designed to 

closely align FINRA’s revenues with its 

costs while preserving the historical 

equitable allocation of fees among 

FINRA members. In parallel, FINRA 

continues to implement operational 

improvements to ensure FINRA’s 

operations are effective and efficient. 

Implementation of the proposed rule 

change would take place over several 

years, with a minority of fees going into 

effect in 2025, most fees implemented in 

2026 or later, and several fees phased in 

over several years between 2025 and 

2029. 

Thus, under the proposed rule change, 

FINRA would aim to collect more than 

90 percent of the revenue it seeks to 

raise in 2026 or later. FINRA is 

submitting the proposed rule change 

now to provide members with sufficient 

advance notice of the proposed fee 

changes for annual budgeting and 

financial planning purposes. The 

proposed rule change is intended to 

provide sustainable longer-term 

funding, in a manner consistent with 

FINRA’s public Financial Guiding 

Principles (‘‘Guiding Principles’’),5 to 

enable FINRA to continue fulfilling its 

regulatory mission. 

FINRA’s Current Fee Structure 

As a not-for-profit SRO, FINRA 

receives no taxpayer funding and 

instead relies on a mix of fees that are 

intended to cover the overall costs of 

FINRA’s operations. The majority of 

FINRA’s funding is derived from three 

regulatory fees: the Gross Income 

Assessment (GIA), Trading Activity Fee 

(TAF), and Personnel Assessment (PA). 

These fees, respectively, reflect one of 

the three critical components driving 

FINRA’s regulatory costs with respect to 

a particular member: (1) the size of the 

firm measured by firm revenue, (2) the 

firm’s trading activity, and (3) the 

number and role of persons registered 

with the firm. FINRA also employs usebased fees for specific services it 

provides to members and the public in 

support of its regulatory mission. 

Several use-based fees, including 

registration fees, qualification 

examination fees, and continuing 

education fees, among others, align with 

a critical component of FINRA’s 

regulatory costs (i.e., the number and 

role of registered persons at a firm). As 

such, FINRA considers those use-based 

fees part of its ‘‘core’’ regulatory fees. 

In addition, FINRA employs other 

use-based fees for certain services it 

provides to members and the public. 

Examples include fees associated with: 

reviewing public offering filings; 

reviewing communications with the 

public; and operating the FINRA 

Dispute Resolution Services (‘‘DRS’’) 

arbitration forum. As FINRA has 

explained previously,6 when applying 

use-based fees, FINRA takes into 

account three associated types of costs: 

direct costs for the program associated 

with the use-based fee, such as program 

development and operating expenses, 

and reinvestments and enhancements; 

indirect costs for the program, including 

supporting services necessary for the 

program’s associated regulatory activity; 

and a contribution to FINRA’s overall 

regulatory operations, which promotes 

its mission of investor protection.7

Thus, taken together, core regulatory 


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8 In addition to the services FINRA provides in 

furtherance of its regulatory mission, FINRA also 

provides certain services on a contract basis to third 

parties. These contract service fees represent 

approximately 8% of FINRA’s total revenues. 

Importantly, these revenues pay in full for the 

services rendered under the contracts, and FINRA’s 

costs to perform these services are not funded with 

any of the regulatory revenue discussed in this 

filing. 

9See supra note 6. 

10See supra note 6. 

11See Securities Exchange Act Release No. 61042 

(November 20, 2009), 74 FR 62616, 62620 

(November 30, 2009) (Order Approving File No. 

SR–FINRA–2009–057). 

12See supra note 5. Information about FINRA’s 

financial reserves is provided each year in FINRA’s 

published annual financial reports. See FINRA 

Financial Reports and Policies, available at https:// 

www.finra.org/about/annual-reports. FINRA strives 

to maintain an appropriate level of reserves, which 

the FINRA Board of Governors has determined to 

be at least one year of expenditures. 

13While fine monies are not included in FINRA’s 

annual operating budget, they are included in cash 

flow projections. For purposes of its projections, 

FINRA assumed a conservative amount of fine 

money for future years based on historical fine 

money receipt. When FINRA imposes fines, the 

amounts are based on the facts and circumstances 

of the misconduct and are guided by the principles 

set forth in FINRA’s Sanction Guidelines that are 

similar in nature—fines are not based on revenue 

considerations, and FINRA does not establish any 

minimum amount of fines that must be collected for 

purposes of the annual operating budget. Fines 

collected are accounted for separately, and the use 

of these monies is subject to special governance 

procedures and restrictions on use, as set forth in 

our Guiding Principles. See supra note 5. In 

accordance with the Guiding Principles, FINRA 

issues a separate annual report detailing use of fine 

monies as approved by the FINRA Board of 

Governors. See, e.g., Report of Use of 2023 Fine 

Monies (June 14, 2024), available at https://

www.finra.org/about/annual-reports/report-use2023-fine-monies. 

14See supra note 6. 

15See FINRA 2024 Annual Budget Summary, 

https://www.finra.org/sites/default/files/2024-06/ 

FINRA-2024-Annual-Budget-Summary.pdf, at 2. 

This potential loss is in line with FINRA’s previous 

multiyear strategic planning for financial 

sustainability, which contemplates a series of 

annual losses in order to reduce the size of FINRA’s 

reserves. As discussed in the Guiding Principles, 

FINRA has relied on its financial reserves, which 

were originally derived from the sale of Nasdaq, to 

help support its regulatory mission. See also 

Funding FINRA’s Mission, available at https://

www.finra.org/media-center/blog/funding-finrasmission. 

FINRA has made reasonably conservative 

assumptions using a variety of information points, 

including historical data and anticipated trends. If 

FINRA’s structural financial deficit is materially 

reduced during this period, or if key assumptions 

change materially, FINRA would consider various 

modifications as appropriate. For example, FINRA 

has used rebates to support its commitment to 

reasonable, cost-based fee assessments in instances 

where revenues significantly exceed expenditures. 

These rebates are approved by the FINRA Board of 

Governors. A number of factors must be considered 

when determining whether to provide rebates, 

including the amount of excess revenue for the 

year, whether budget projections anticipate nearterm revenue shortfalls, and the number of firms 

that would be eligible to receive rebates. FINRA 

makes information about these factors transparent 

to the public each year. 

16FINRA’s technology costs, for example, have 

risen by approximately 11% per year over the last 

five years. 

fees and other use-based fees allow 

FINRA to fund its regulatory mission.8

FINRA has explained that numerous 

operations and services must be funded 

by general revenue sources, which 

include both core regulatory and other 

use-based fees.9 There are several 

reasons for this. For instance, it is not 

feasible to associate a direct affiliated 

revenue stream for each of FINRA’s 

programs (e.g., examinations of 

members do not have an associated 

revenue stream). Similarly, there is no 

one consistent driver of costs of a 

particular regulatory program. Even 

where one cost driver may, at times, 

align with a particular revenue stream 

(e.g., as trading activity increases, 

certain Market Regulation costs may 

increase), the relationship may not hold 

at other times. For example, novel 

trading patterns in single or multiple 

securities may not be associated with 

significant volume but may require 

comparatively larger efforts in terms of 

regulatory oversight. Likewise, periods 

of intense market volatility may 

influence regulatory costs independent 

of the change in trading volume. 

Further, in light of FINRA’s diverse 

membership of firms that vary greatly in 

size and business model, it is not 

feasible to develop a comprehensive 

pricing structure that precisely accounts 

for the particular costs associated with 

each member.10 Rather, FINRA’s current 

fee structure is designed to ensure 

sufficient funding to meet all of its 

regulatory obligations in a manner that 

equitably allocates fees among FINRA 

members, notwithstanding the 

fluctuations in different revenue streams 

and cost drivers that are naturally 

expected to occur over time. The 

Commission has historically agreed that 

this overall cost-based pricing structure 

‘‘is reasonable in that it achieves a 

generally equitable impact across 

FINRA’s membership and correlates the 

fees assessed to the regulatory services 

provided by FINRA.’’ 11 FINRA 

continues to believe that this approved 

approach to overall pricing is the most 

reasonable and equitable way to provide 

sufficient funding to meet its regulatory 

obligations as a not-for-profit SRO with 

broad, diverse membership. 

As set out in the Guiding Principles, 

FINRA targets break-even cash flows as 

a means to appropriately fund its 

mission of protecting investors and 

promoting market integrity while 

facilitating vibrant capital markets. 

Careful expense management is another 

key element of the Guiding Principles. 

The Guiding Principles also explain the 

extent to which FINRA relies on its 

financial reserves—originally derived 

from the sale of Nasdaq—to help 

support its regulatory mission.12 The 

Guiding Principles also describe how 

FINRA uses fine monies—which are not 

included in FINRA’s operating budget— 

to promote compliance and improve 

markets.13

FINRA’s most recent comprehensive 

fee increase included increases to core 

regulatory fees from 2022 through 

2024.14 Looking ahead, FINRA projects 

that its current fees will not keep pace 

with its projected future expenses in 

light of the continued growth in the 

breadth and complexity of FINRA’s 

regulatory obligations, described in 

detail below. As FINRA noted recently 

in its 2024 Annual Budget Summary, 

based on the current fee structure 

(inclusive of the fee adjustments made 

from 2022 through 2024), FINRA 

projects it will recognize an operating 

loss in 2024, with a drawdown on its 

financial reserves of approximately $100 

million.15 FINRA estimates that, absent 

any action, its reserve balance will fall 

below its Board-approved target level of 

one-year of operating costs by 2027. As 

described in more detail below, FINRA 

has carefully managed its expenses; 

however, careful expense management 

cannot suffice as a sustainable financial 

strategy in the long term, particularly in 

the context of rising systemic costs and 

FINRA’s increasing regulatory 

responsibilities. 

Background 

Over the past several years, FINRA’s 

regulatory and oversight responsibilities 

have grown significantly, and FINRA 

anticipates that they will continue to 

grow over the rest of this decade, 

requiring investments in technology and 

increased headcount. Simultaneously, 

FINRA has experienced substantial 

systemic expense growth resulting from, 

among other things, elevated wage 

inflation and increased operating costs 

related to technology.16 Several factors 

have contributed to these areas of 

growth, including: continued increases 

in the volume and complexity of 

member activity; new investment 

products, services, and market 

participants under FINRA’s purview; 

the continuing evolution of market 

structure and trading patterns; and the 

SEC’s adoption of significant new rules 

that require implementation by FINRA 

and its expanded member oversight. 

For example, FINRA has made 

substantial investments to supervise or 

comply with new and amended SEC 

rules, such as amendments to Disclosure 


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17The updated definition covers additional 

market participants engaged in liquidity-providing 

activities that generally would require SRO 

membership. 18 Detailed information about the FINRA360 

initiative is available at https://www.finra.org/ 

about/finra-360. 

19 Detailed information about FINRA’s ‘‘Digital 

Experience Transformation’’ is available at https:// 

www.finra.org/filing-reporting/dxt. FINRA built the 

capabilities of the Digital Experience 

Transformation initiative in consultation with the 

industry, and FINRA’s investment is estimated to 

save the industry more than $200 million annually 

in time and direct costs. 

20See Regulatory Notice 23–17 (October 2023). 

21Based on FOCUS reporting. 

22FINRA total compensation represents business 

compensation, excluding technology. Average U.S. 

employee wage growth represents Finance and 

Business Services wage growth supplied by the 

Bureau of Labor Statistics and Federal Reserve Bank 

of Atlanta. See Current Population Survey, Bureau 

of Labor Statistics, and Federal Reserve Bank of 

Atlanta Calculations at https://www.atlantafed.org/ 

chcs/wage-growth-tracker. 

23For ease of reference in this filing, FINRA refers 

to the following core regulatory fees: GIA; TAF; PA; 

Branch Office Fees; Registration; Qualification 

Examination; Continuing Education Regulatory 

Element Reporting; Late Disclosure; System 

Processing; and Renewal Late Fee. 

24For ease of reference in this filing, FINRA refers 

to the following select use-based fees: Corporate 

Financing Private Placement Review; Corporate 

Financing Public Offering Review; Advertising 

Regulation Review; DRS Arbitration; and 

Regulation T and Exchange Act Rule 15c3–3(n) 

Requests for Extension of Time. The proposed fee 

increase will apply to filings or submissions related 

to these use-based services on or after the effective 

date. 

25FINRA considered feedback from members of 

FINRA’s advisory committees and other industry 

consultations that emphasized the importance of 

advance notice of fee increases to permit member 

firms to better plan for the proposed package of fee 

increases over multiple budget cycles. FINRA also 

considered stakeholder feedback that one-time 

increases for certain fees help reduce the 

administrative burdens on members. 

26Fees listed in chronological order of initial 

implementation. Unless specified otherwise in the 

table above, the proposed fee increase would take 

effect on January 1 of the year stated. This table 

does not include proposed conforming amendments 

to two fees that impact funding portal members. 

of Order Execution Information, 

Regulation M, Shortening the Securities 

Transaction Settlement Cycle, 

Regulation Best Interest, Market Data 

Infrastructure, and Minimum Pricing 

Increments, Access Fees, and 

Transparency of Better Priced Orders. 

FINRA must also be prepared to 

implement and supervise significant 

potential new and amended rules that 

the SEC has proposed, including 

Regulation S–P, Conflicts of Interest 

Associated with the Use of Predictive 

Data Analytics, Regulation Systems 

Compliance and Integrity, Cybersecurity 

Risk Management, Regulation Best 

Execution, and the Order Competition 

Rule. Furthermore, FINRA is investing 

in preparation for its expanded role in 

the oversight of a broader range of 

market participants under several SEC 

rulemakings. For example, the SEC has 

narrowed the exemption for certain 

exchange members under Exchange Act 

Rule 15b9–1, further defined ‘‘as part of 

a regular business’’ 17 in the definitions 

of ‘‘dealer’’ and ‘‘government securities 

dealer’’ under the Exchange Act, and 

proposed to amend the definition of 

‘‘exchange’’ under Exchange Act Rule 

3b–16 and amend Regulation ATS. 

FINRA is also investing to enable 

continued effective oversight over 

evolving trading patterns, such as the 

significant growth in retail trading, 

growth in smaller and fractional share 

trading, and increased trading outside of 

regular trading hours. These and other 

market developments, together with the 

evolution of new and evolving products 

such as securities with crypto asset 

components and short-dated options 

products, require increased oversight by 

FINRA staff. 

FINRA is committed to a culture of 

continuous improvement, with a 

rigorous focus on carefully managing 

costs and identifying new efficiency 

opportunities, where consistent with its 

mission. FINRA has exercised prudent 

expense control and managed costs 

through various initiatives and 

technology investments that have 

helped to enhance efficiency and 

effectiveness. Beginning with the 

FINRA360 18 initiative, which launched 

a comprehensive self-evaluation and 

organizational improvement exercise in 

2017 to ensure that FINRA was 

maximizing its effectiveness, FINRA has 

implemented a number of 

enhancements including: enforcement 

program consolidation; new external 

transparency tools; the launch of the 

Small Firm Helpline; increased 

examiner training; creation of an 

Innovation Outreach Initiative; and the 

development of a program to evaluate 

and integrate advances in data analytics. 

FINRA continues to invest in 

technology to better serve its mission 

and to improve FINRA’s ability to 

communicate with members. For 

example, FINRA completed a multi-year 

digital platform upgrade that improved 

system interfaces, including essential 

registration and disclosure systems used 

by members.19 FINRA also continues to 

build on its early use of cloud 

computing in regulation, and invested 

in an Advanced Analytics Program that 

supports risk identification and other 

regulatory efforts. In the interest of 

regulatory efficiency, FINRA also 

recently discontinued a program 

requiring the reporting of prescribed 

data by certain members based on 

availability of data from alternative 

sources, resulting in millions of dollars 

in cost savings benefits to members.20

Further, cost savings have been 

accomplished in recent years through 

supplementary expense reduction 

initiatives, including conducting a 

comprehensive efficiency review of 

FINRA’s core business lines; 

establishing a framework for improving 

measurement of FINRA’s key 

performance results; voluntary 

retirement/incentive programs in 2020 

and 2024; and strategic reductions in 

FINRA’s corporate real estate footprint. 

Given this context, and despite the 

significant increase in the breadth and 

complexity of FINRA’s regulatory 

responsibilities, FINRA’s expense 

growth rate from 2013 through 2023 has 

been significantly lower than that of the 

broader financial services industry. 

Specifically, FINRA’s costs increased by 

41% cumulatively during this period 

compared with 129% for the industry.21

Similarly, FINRA’s total compensation 

costs rose by 31% on a cumulative basis 

during this period as compared with a 

50% increase for the average U.S. 

financial services employee.22 FINRA’s 

restrained expense growth is the result 

of careful management of both 

compensation costs, the largest driver of 

FINRA’s budget, and non-compensation 

costs, such as technology and real 

estate. 

Notwithstanding these efforts, as 

discussed, FINRA projects that its 

current fees will not keep pace with its 

projected future expenses. FINRA 

therefore proposes to increase its fees as 

described below. 

Proposal 

The proposed rule change would raise 

FINRA’s core regulatory fees 23 as well 

as select use-based fees 24 that fund 

various FINRA services and programs. 

Consistent with the Guiding Principles, 

the proposed rule change would more 

effectively allow FINRA to balance its 

cash flow sources, operating expenses 

and capital expenditures, and stabilize 

its financial reserves by 2029. As 

discussed above, a minority of proposed 

fee increases would go into effect in 

2025, while most fees would be 

implemented in 2026 or later, and 

several fees would be phased in over 

several years between 2025 and 2029.25

The following table summarizes the 

proposed timeline for implementing 

each fee increase: 26


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27As discussed below, Chart 2, attached in 

Exhibit 3, available on FINRA’s website at http:// 

www.finra.org, demonstrates the difference between 

FINRA’s projected cash flow sources and cash flow 

uses through 2029, absent the proposed rule 

change. 

28Anticipated costs would not include potential 

costs associated with new services that may be 

initiated or approved in the future. FINRA may 

submit separate fee filings to cover program costs 

for new services. FINRA notes this proposed rule 

change does not include fees associated with the 

Consolidated Audit Trail (‘‘CAT’’) or the Securities 

Lending and Transparency Engine (‘‘SLATE’’), both 

of which are subject to separate proposed rule 

changes with the Commission. See, e.g., Securities 

Exchange Act Release No. 100920 (September 4, 

2024), 89 FR 73457 (September 10, 2024) (Notice of 

Filing and Immediate Effectiveness of File No. SR– 

FINRA–2024–011); Securities Exchange Act Release 

No. 100920 (September 4, 2024), 89 FR 73457 

(September 10, 2024) (Notice of Filing and 

Immediate Effectiveness of File No. SR–FINRA– 

2024–012). Similarly, FINRA notes that program 

costs associated with the reporting of transactions 

in U.S. Treasury Securities (‘‘Treasuries’’) are not 

included in the targeted amount sought by this 

proposal; currently, Treasuries transactions are 

exempted from both TRACE transaction reporting 

fees and from the TAF. See Securities Exchange Act 

Release No. 79116 (October 18, 2016), 81 FR 73167, 

73176 (October 24, 2016) (Order Approving File No. 

SR–FINRA–2016–027). 

29See Exhibit 3, Charts 5 and 6. 

30The CAGR provides a geometric average of the 

change in fees over the implementation period. It 

is particularly useful for comparing growth rates 

from various sets of data over the same multi-year 

period. 

31Some of the fees discussed in this filing are or 

would be absorbed by non-members, including 

Corporate Financing review fees for public offerings 

and private placements, which are generally passed 

through to issuers, and a portion of DRS fees that 

are paid directly by customers. 

32Many members identify that they pass through 

TAF to customers. Assuming 65% of TAF is passed 

to non-members, the fee increase CAGR to 

membership falls to 3.9%. If 100% of TAF is passed 

through, the fee increase CAGR to FINRA’s 

membership falls to 3.1%. 

33 Industry revenue projections for 2029 are based 

on historical FOCUS revenue growth of 8.5% 

(2013–2023). 

34Section 2 of Schedule A to the FINRA By-Laws 

defines gross revenue for assessment purposes as 

total income as reported on FOCUS form Part II or 

IIA, excluding commodities income. 

35The applicable GIA rate applies on a marginal 

basis to annual gross revenues that exceed each 

applicable threshold. While the GIA rate structure 

has not changed since 2008, FINRA made 

modifications to the method of GIA calculation 

FEE IMPLEMENTATION SCHEDULE

Fee Implementation 

schedule 

Advertising Regulation Review ......................................................................................................................................................... 2025. 

DRS Arbitration ................................................................................................................................................................................. 2025. 

Regulation T and Exchange Act Rule 15c3–3(n) Requests for Extension of Time ........................................................................ 2025. 

Corporate Financing Private Placement Review .............................................................................................................................. 2025 (Q3). 

Corporate Financing Public Offering Review ................................................................................................................................... 2025 (Q3)– 

2029. 

Branch Office Fees ........................................................................................................................................................................... 2026, 2028. 

Continuing Education Regulatory Element ....................................................................................................................................... 2026. 

Late Disclosure ................................................................................................................................................................................. 2026. 

Qualification Examination ................................................................................................................................................................. 2026. 

System Processing ........................................................................................................................................................................... 2026, 2028. 

GIA .................................................................................................................................................................................................... 2026–2028. 

TAF ................................................................................................................................................................................................... 2026–2029. 

PA ..................................................................................................................................................................................................... 2026–2029. 

Registration ....................................................................................................................................................................................... 2028. 

Renewal Late Fee ............................................................................................................................................................................ 2028. 

Taken together, the proposed rule 

change is projected to generate 

additional revenue of between $40 

million and $160 million each year 

compared to the previous year from 

2025 through 2029. The amount of the 

increase varies each year due to the 

phased implementation schedule 

described above. Cumulatively, the 

proposed rule change would increase 

FINRA’s annual fee revenues by an 

estimated $450 million (once fully 

implemented in 2029) as compared to 

the annual fee revenues that would have 

existed in the absence of the proposed 

rule change. As such, the proposed rule 

change is calibrated to cover FINRA’s 

projected budget deficit and achieve a 

balanced budget by 2029.27 This 

approach will retain FINRA’s reserve 

balance at its target level based on 

FINRA’s projected revenue and costs,28

while providing members advance 

notice of fee increases, phasing some of 

the increases over multiple years, and 

maintaining an equitable allocation of 

fees among FINRA members. As 

discussed further below, under the 

proposed rule change, the current 

proportion of fees borne by FINRA 

members based on firm size and 

business model, respectively, would 

remain stable through 2029.29

In total, the proposed fee changes will 

result in a compounded annualized 

growth rate (‘‘CAGR’’) of 5.3% across 

total FINRA fees between 2025 and 

2029.30 Excluding specific fees typically 

passed on by members,31 the CAGR 

between 2025 and 2029 is projected to 

be 4.8% for FINRA members. Further, 

assuming that the majority, if not all, of 

TAF is also passed directly through to 

investors, the fee increase CAGR falls to 

the 3% to 4% range for FINRA 

members.32 During the same period, 

FINRA reasonably anticipates that its 

future expenses will grow at a CAGR of 

5.9%, with a portion of such expense 

growth covered by anticipated cash flow 

sources other than the proposed fee 

increases. FINRA’s fees will continue to 

represent a small dollar proportion of 

industry revenues as reported in FOCUS 

reports. FINRA estimates that FINRA’s 

total fees when the proposed fee 

increases are fully implemented would 

represent approximately 0.31% of 

recent industry revenues by 2029.33

In sum, the proposed rule change is 

designed to collect the targeted revenue 

amount needed to address FINRA’s 

projected budget deficit through a 

combination of core regulatory and 

select use-based fees that yield an 

equitable overall fee increase across 

member size and type. The proposed 

rule change is thus designed to preserve 

the same SEC-approved, equitable fee 

allocation across members that FINRA 

has maintained for years by minimizing 

the change to distribution of fees across 

members. 

Each specific fee in the proposed rule 

change is described below. 

Core Regulatory Fees 

Gross Income Assessment 

The GIA is a core regulatory fee 

designed to correlate to one of the three 

critical components of FINRA’s 

regulatory costs—the size of a firm 

(based on revenue). Accordingly, the 

GIA is based on a firm’s annual gross 

revenue,34 employing a graduated 

seven-tier rate structure that has applied 

since 2008.35


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under the structure in 2009 and 2014, and increased 

the GIA rate between 2022 and 2024. In 2009, the 

Commission approved a GIA calculation 

modification designed to mitigate year-to-year 

revenue volatility by assessing members the greater 

of a GIA calculated based on the firm’s annual gross 

revenue from the preceding calendar year, or a GIA 

averaged over the prior three years. See Order 

Approving SR–FINRA–2009–057, supra note 11, 74 

FR 62616, 62617. In 2014, FINRA refined the GIA 

calculation method to provide limited relief for 

smaller member firms from unintended effects of 

the 2009 calculation change; as a result of the 2014 

change, firms that have annual gross revenue of $25 

million or less pay the GIA based on preceding year 

revenue without looking to a three-year average. See 

Securities Exchange Act Release No. 73632 

(November 18, 2014), 79 FR 69937 (November 24, 

2014) (Notice of Filing and Immediate Effectiveness 

of File No. SR–FINRA–2014–046). In 2020, FINRA 

proposed changes to the GIA tier rates, which went 

into effect between 2022 and 2024. See Order 

Approving SR–FINRA–2020–032, supra note 6, 85 

FR 66592. 

36FINRA notes the Exhibit 5 to this proposed rule 

change, available on FINRA’s website at http://

www.finra.org, is marked to show the changes as 

they are proposed to take effect each year, as 

described in this filing. Specifically, Exhibit 5A and 

5B shows the proposed changes that would take 

effect in 2025, Exhibit 5C shows the proposed 

changes that would take effect in 2026, Exhibit 5D 

shows the proposed changes that would take effect 

in 2027, Exhibit 5E shows the proposed changes 

that would take effect in 2028, and Exhibit 5F 

shows the proposed changes that would take effect 

in 2029. 

Section 1(c) of Schedule A to the 

FINRA By-Laws sets forth the GIA. The 

current rates, which reflect the fee 

adjustments made from 2022 through 

2024, are as follows: 

(1) $1,200.00 on annual gross revenue 

up to $1 million; 

(2) 0.1732% of annual gross revenue 

greater than $1 million up to $25 

million; 

(3) 0.3705% of annual gross revenue 

greater than $25 million up to $50 

million; 

(4) 0.0738% of annual gross revenue 

greater than $50 million up to $100 

million; 

(5) 0.0520% of annual gross revenue 

greater than $100 million up to $5 

billion; 

(6) 0.0566% of annual gross revenue 

greater than $5 billion up to $25 billion; 

and 

(7) 0.1219% of annual gross revenue 

greater than $25 billion. 

Thus, for example, under the current 

rates, for a member with annual gross 

revenue of $30 billion, the GIA would 

be calculated as follows: the first $1 

million at the Tier 1 rate ($1,200), plus 

the next $24 million at the Tier 2 rate 

(0.1732%), plus the next $25 million at 

the Tier 3 rate (0.3705%), plus the next 

$50 million at the Tier 4 rate (0.0738%), 

plus the next $4.9 billion at the Tier 5 

rate (0.0520%), plus the next $20 billion 

at the Tier 6 rate (0.0566%), plus the 

final $5 billion at the Tier 7 rate 

(0.1219%), for a total assessment of 

$20,135,293. 

FINRA is proposing the following 

changes to its GIA tier rates from 2026 

through 2028.36

GIA—PROPOSED IMPLEMENTATION

Tier 

(revenue) 

2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

$0 to $1 million ........................................ $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 

Greater than $1 million up to $25 million 0.1732% 0.1732% 0.1827% 0.2056% 0.2280% 0.2280% 

Greater than $25 million up to $50 million ........................................................ 0.3705% 0.3705% 0.3909% 0.4397% 0.4877% 0.4877% 

Greater than $50 million up to $100 million ........................................................ 0.0738% 0.0738% 0.0779% 0.0876% 0.0972% 0.0972% 

Greater than $100 million up to $5 billion 0.0520% 0.0520% 0.0549% 0.0618% 0.0685% 0.0685% 

Greater than $5 billion up to $25 billion .. 0.0566% 0.0566% 0.0597% 0.0672% 0.0745% 0.0745% 

Greater than $25 billion ........................... 0.1219% 0.1219% 0.1286% 0.1447% 0.1604% 0.1604% 

Thus, for example, under the new 

rates once fully implemented in 2029, 

for a member with annual gross revenue 

of $30 billion, the GIA would be 

calculated as follows: the first $1 

million at the Tier 1 rate ($1,200), plus 

the next $24 million at the Tier 2 rate 

(0.2280%), plus the next $25 million at 

the Tier 3 rate (0.4877%), plus the next 

$50 million at the Tier 4 rate (0.0972%), 

plus the next $4.9 billion at the Tier 5 

rate (0.0685%), plus the next $20 billion 

at the Tier 6 rate (0.0745%), plus the 

final $5 billion at the Tier 7 rate 

(0.1604%), for a total assessment of 

$26,502,945. 

When the proposed GIA rates are fully 

implemented, they are designed to 

generate an additional $80 million in 

annual revenue by 2029. The proposed 

GIA increase preserves the existing 

seven-tier structure and calculation 

method while raising each tier 

proportionately. With these proposed 

increases, the GIA structure would 

continue to reflect the costs associated 

with performing regulatory 

responsibilities across FINRA’s diverse 

population of members. Notably, the 

proposed rule change would not 

increase the flat $1,200 fee for members 

with revenues of $1 million or less. 

Maintaining this fee level for the 

smallest members preserves FINRA’s 

existing approach to cost distribution 

between members of varying sizes. 

Further, FINRA seeks to preserve the 

historical proportionality across fees 

associated with the three main 

components of FINRA’s regulatory 

costs—the size of the firm measured by 

firm revenue, the firm’s trading activity, 

and the number and role of persons 

registered with the firm—with the aim 

of collecting a generally comparable 

amount of revenue from fees associated 

with each of these components once the 

proposed rule change is fully 

implemented. To that end, the proposed 

rule change would increase the GIA at 

a reduced rate relative to the other core 

regulatory fees. This is because, for 

2024, GIA revenues exceeded 

projections due to record aggregate 

industry revenues. As a result, FINRA 

has proposed to phase in the proposed 

increases to the GIA more gradually, 

and at a reduced rate, relative to the 

other core regulatory fees to help 

preserve historical proportionality 

across these fees and achieve a generally 

comparable revenue distribution. 

FINRA believes this proportional 

approach to fee increases will provide 

member firms a greater degree of 

certainty and predictability, as it seeks 

to maintain consistency with FINRA’s 

existing equitable fee distribution. 

FINRA further believes its proportional 

approach reduces the potential for 

unintended impacts on the services 

provided by member firms, and the 

business models they adopt, that could 

arise from significant changes to fee 

distribution. 

Trading Activity Fee 

The TAF is a core regulatory fee 

designed to correlate to a critical 

component of FINRA’s regulatory 

costs—the trading activity of a firm. 


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37See Securities Exchange Act Release No. 46416 

(August 23, 2002), 67 FR 55901 (August 30, 2002) 

(Notice of Filing and Immediate Effectiveness of 

File No. SR–NASD–2002–98). 

38Certain types of transactions are excluded from 

the TAF (e.g., primary market transactions, 

proprietary transactions executed by a member on 

a national securities exchange in the member’s 

capacity as an exchange specialist or market maker, 

transactions effected by a proprietary trading firm 

on an exchange of which such firm is a member, 

and transactions in U.S. Treasury Securities). See 

FINRA By-Laws, Schedule A, Section 1(b)(2) 

(providing full list of transactions exempt from the 

TAF). This proposed rule change would not change 

the scope of any current TAF exemptions. 

39 If the execution price for a covered security is 

less than the TAF rate ($0.000166 for covered 

equity securities, $0.00279 for covered options 

contracts, or $0.014 for a security future) on a per 

share, per contract, or round turn transaction basis, 

then no fee is assessed. 

40See Order Approving SR–FINRA–2020–032, 

supra note 6, 85 FR 66592. 

FINRA initially adopted the TAF in 

2002, modeled on the Commission’s 

transaction-based Section 31 fee.37 The 

TAF is generally assessed on the sale of 

all exchange-listed securities wherever 

executed (except debt securities that are 

not TRACE-Eligible Securities), overthe-counter equity securities, security 

futures, TRACE-Eligible Securities 

(provided that the transaction is a 

Reportable TRACE Transaction), and all 

municipal securities subject to 

Municipal Securities Rulemaking Board 

reporting requirements.38 The current 

TAF rates, which reflect the fee 

adjustments made from 2022 through 

2024, are: 

(1) $0.000166 per share for each sale 

of a covered equity security, with a 

maximum charge of $8.30 per trade; 

(2) $0.00279 per contract for each sale 

of an option; 

(3) $0.00011 per contract for each 

round turn transaction of a security 

future, provided there is a minimum 

charge of $0.014 per round turn 

transaction; 

(4) $0.00105 per bond for each sale of 

a covered TRACE-Eligible Security 

(other than an Asset-Backed Security) 

and/or municipal security, with a 

maximum charge of $1.05 per trade; and 

(5) $0.00000105 times the value, as 

reported to TRACE, of a sale of an AssetBacked Security, with a maximum 

charge of $1.05 per trade.39

FINRA is proposing the following 

changes to its TAF rates between 2026 

and 2029: 

TAF—PROPOSED IMPLEMENTATION

Security type 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

Covered Equity Security.$0.000166 per share 

(up to $8.30 max 

per trade).

$0.000166 per share 

(up to $8.30 max 

per trade).

$0.000195 per share 

(up to $9.79 max 

per trade).

$0.000232 per share 

(up to $11.61 max 

per trade).

$0.000240 per share 

(up to $12.05 max 

per trade).

$0.000249 per share 

(up to $12.50 max 

per trade). 

Options ....................... $0.00279 per contract.$0.00279 per contract.$0.00329 per contract.$0.00390 per contract.$0.00404 per contract.$0.00420 per contract. 

Security Future ........... $0.00011 per contract (with $0.014 

minimum per 

round turn transaction).

$0.00011 per contract (with $0.014 

minimum per 

round turn transaction).

$0.000135 per contract (with $0.016 

minimum per 

round turn transaction).

$0.00016 per contract (with $0.019 

minimum per 

round turn transaction).

$0.000166 per contract (with $0.020 

minimum per 

round turn transaction).

$0.000172 per contract (with $0.021 

minimum per 

round turn transaction). 

TRACE-Eligible Security (Other than 

Asset-Backed Security) or municipal security.

$0.00105 per bond 

(up to $1.05 max 

per trade).

$0.00105 per bond 

(up to $1.05 max 

per trade).

$0.00124 per bond 

(up to $1.24 max 

per trade).

$0.00147 per bond 

(up to $1.47 max 

per trade).

$0.00153 per bond 

(up to $1.53 max 

per trade).

$0.00158 per bond 

(up to $1.58 max 

per trade). 

TRACE-Eligible AssetBacked Security.$0.00000105 times 

reported value (up 

to $1.05 max per 

trade).

$0.00000105 times 

reported value (up 

to $1.05 max per 

trade).

$0.00000124 times 

reported value (up 

to $1.24 max per 

trade).

$0.00000147 times 

reported value (up 

to $1.47 max per 

trade).

$0.00000153 times 

reported value (up 

to $1.53 max per 

trade).

$0.00000158 times 

reported value (up 

to $1.58 max per 

trade). 

When the new TAF rates are fully 

implemented, they are designed to 

generate an additional $186 million in 

annual revenue by 2029. The proposed 

TAF changes reflect proportional 

increases in the amount raised for each 

security type—meaning there is no 

anticipated change in the percentage of 

overall TAF revenue collected from 

transactions in each security type— 

phased in incrementally over the 

delayed four-year implementation 

period. Accordingly, while TAF 

revenues are largely derived from 

transactions in equity securities, like the 

SEC’s Section 31 fee, this proposed rule 

change is intended to preserve the 

current distribution of TAF fees among 

security types. 

The aggregate TAF increases would 

generate more revenue relative to the 

other core regulatory fees to preserve the 

historical proportionality among the 

core regulatory fees associated with firm 

trading activity and the other main 

components of FINRA’s regulatory 

costs—the size of the firms measured by 

firm revenue and the number and role 

of persons registered with the firm— 

while seeking to collect a generally 

comparable amount of revenue from 

fees associated with each component. 

This is consistent with the proportional 

approach to fee increases discussed 

throughout this filing, which seeks to 

maintain consistency with FINRA’s 

existing equitable fee distribution. 

Personnel Assessment 

The PA is a core regulatory fee 

designed to correlate to the third critical 

component of FINRA’s regulatory 

costs—the number and role of registered 

persons at a firm. The PA currently is 

assessed on a three-tiered rate structure: 

members with one to five registered 

representatives and principals are 

assessed $210 for each such registered 

person (‘‘Reps’’ in the table below); 

there is a $200 charge for each of the 

next 20 registered persons (between 6 

and 25); and a $190 charge for each 

additional registered person beyond 25 

registered persons. 

Section 1(e) of Schedule A to the 

FINRA By-Laws sets forth the PA. These 

rates last increased between 2022 and 

2024.40 FINRA is proposing the 

following increases to its PA tier rates 

between 2026 and 2029: 


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41See Regulatory Notice 12–32 (June 2012). 

42The projected revenue from the proposed 

increased Branch Office Fees assumes that the 

number of branch offices will remain at 2024 levels 

through 2029. Due to the COVID–19 pandemic, 

FINRA had provided regulatory relief including a 

temporary suspension of the requirements to 

maintain updated Form U4 information regarding 

the office of employment address for registered 

persons who temporarily relocated due to the 

pandemic, and the requirement to submit branch 

office applications on Form BR for any newly 

opened temporary office locations or space-sharing 

arrangements. See Regulatory Notice 20–08 (March 

2020). In mid-2024, that relief ended and FINRA 

implemented new Rule 3110.19, which exempts 

from branch office registration a residential 

supervisory location (or RSL). An RSL is a private 

residence at which an associated person engages in 

specified supervisory activities, subject to certain 

safeguards and limitations. See Regulatory Notice 

24–02 (January 2024). FINRA believes its 

assumptions are reasonable given the recency of 

these changes. As noted, if key assumptions change 

materially, FINRA would consider various 

modifications as appropriate, including rebates, for 

example. See supra note 15. 

43See supra note 6. 

PA—PROPOSED IMPLEMENTATION

Tier 

(number of reps) 2024 2025 (no change) 2026 2027 2028 2029 

Reps 0–5 .................................................. $210 $210 $245 $260 $270 $295 

Reps 6–25 ................................................ 200 200 235 250 260 285 

Reps 26 and greater ................................ 190 190 225 240 250 275 

When the proposed PA rates are fully 

implemented, they are designed to 

generate an additional $52 million in 

annual revenue by 2029. The proposed 

PA increases, together with the 

proposed increases to the use-based fees 

aligned with the number and role of 

registered persons at a firm discussed 

below, are calibrated to preserve the 

historical proportionality among the 

core regulatory fees associated with the 

three main components of FINRA’s 

regulatory costs and collect a generally 

comparable amount of revenue from 

fees associated with each component. 

This is consistent with the proportional 

approach to fee increases discussed 

throughout this filing, which seeks to 

maintain consistency with FINRA’s 

existing equitable fee distribution. 

Branch Office Fees 

FINRA members are assessed 

regulatory fees for registered branch 

offices. These fees are related to firm 

size and structure. Section 4(a) of 

Schedule A to the FINRA By-Laws 

includes a branch office registration fee 

and a branch office system processing 

fee upon the initial registration of each 

branch office as defined in the By-Laws. 

The initial branch office registration fee 

is waived for the first branch office 

registered by a member. In addition, 

each member is assessed an annual 

registration fee for each branch office 

registered by the member. This fee has 

a tiered regressive rate structure that 

assesses a per branch office annual 

registration fee depending on the 

number of branch offices the firm has. 

Currently, each member is assessed an 

annual registration fee of: (1) $175, for 

each of the first 250 branch offices 

registered by the member; (2) $150, for 

each of branch offices 251 to 500 

registered by the member; (3) $125, for 

each of branch offices 501 to 1,000 

registered by the member; (4) $100, for 

each of branch offices 1,001 to 2,000 

registered by the member; and (5) $75, 

for every branch office greater than 

2,000 registered by the member. For one 

branch office per member per year, the 

annual branch office registration fee and 

annual branch office system processing 

fee is waived. 

FINRA has not increased the branch 

office registration fee since 2013.41

FINRA is proposing to retain the tiered 

regressive rate structure, but increase 

the branch office registration fee in 2026 

as follows: 

BRANCH OFFICE REGISTRATION FEES—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

FINRA Branch Registration Fee .............. $75 $75 $105 $105 $105 $105 

Annual Registration Fee 1–250 branch 

offices registered by the member ........ 175 175 245 245 245 245 

Annual Registration Fee 251–500 branch 

offices registered by the member ........ 150 150 210 210 210 210 

Annual Registration Fee 501–1000 

branch offices registered by the member ........................................................ 125 125 175 175 175 175 

Annual Registration Fee 1001–2000 

branch offices registered by the member ........................................................ 100 100 140 140 140 140 

Annual Registration Fee 2001+ branch 

offices registered by the member ........ 75 75 105 105 105 105 

When the proposed branch office 

registration fee changes are fully 

implemented, they are designed to 

generate $7 million in annual revenue 

by 2029.42 The proposed rule change 

would retain the same tiered regressive 

rate structure that assesses a per branch 

office annual registration fee depending 

on the number of branch offices of the 

firm, but would raise the fee associated 

with each range of branch office 

numbers. FINRA would continue to 

waive, for one branch office per member 

per year, payment of the annual 

registration fee, but increase the amount 

of the waiver from $175 to $245 to 

match the new rates. 

FINRA has not increased the branch 

office system processing fee since 

2022.43 FINRA is proposing to increase 

the branch office system processing fee 

in 2028 as follows: 


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44See supra note 42. 45Specified information reported to the CRD 

system is displayed in BrokerCheck®, an electronic 

system that provides the public with information on 

the professional background, business practices, 

and conduct of FINRA members and their 

associated persons. Investors use BrokerCheck to 

help make informed choices about the individuals 

and firms with which they currently conduct or are 

considering conducting business. 

46FINRA outsources fingerprint processing to 

Sterling Identity (‘‘Sterling’’), an FBI-approved 

channeler that processes fingerprints for members 

on FINRA’s behalf. This provides for a more 

efficient and streamlined process with fewer 

fingerprint rejections, secure electronic 

transmission of FBI results, and significantly 

reduced turn-around times. Sterling assesses and 

collects all fees for fingerprint collection and 

processing, including the FBI fee. 

47See Order Approving SR–FINRA–2020–032, 

supra note 6, 85 FR 66592. 48See Securities Exchange Act Release No. 67247 

(June 25, 2012), 77 FR 38866 (June 29, 2012) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–FINRA–2012–030). 

49FINRA also proposes conforming changes to 

Section 15(g) of Schedule A to the FINRA By-Laws 

to align this proposed fee change with the same fees 

for Funding Portal members. 

50This fee applies for each initial or transfer 

Uniform Application for Securities Industry 

Registration or Transfer (‘‘Form U4’’) filed by a 

member in the CRD system to register an 

individual. Section 4(b)(1) of Schedule A includes 

a discount in cases where a member is transferring 

the registrations of individuals in connection with 

the acquisition of all or part of another member’s 

business. The discount ranges from 10 to 50 

percent, based on the number of registered 

personnel being transferred. While FINRA is 

proposing to increase the registration fee, it is not 

proposing to make any changes to the discount 

schedule. 

51This fee applies for the additional processing 

of each initial or amended Form U4, Form U5, or 

Form BD that includes the initial reporting, 

amendment, or certification of one or more 

disclosure events or proceedings. 

52This fee applies for processing and posting to 

the CRD system each set of fingerprints submitted 

electronically by a member to FINRA, plus any 

other charge that may be imposed by the United 

States Department of Justice for processing each set 

of fingerprints. 

53 In 2024, the fee for funding portal members that 

submit fingerprints electronically is $15. See 

Section 15(g) of Schedule A to FINRA By-Laws. 

54As discussed below, FINRA proposes a 

conforming change in 2025 to Section 15(g) of 

Schedule A to the FINRA By-Laws to align the fee 

for funding portal members that submit fingerprints 

electronically with the same fee charged to brokerdealer members. 

55This fee applies for processing and posting to 

the CRD system each set of fingerprints submitted 

in non-electronic format by a member to FINRA, 

plus any other charge that may be imposed by the 

United States Department of Justice for processing 

each set of fingerprints. 

BRANCH OFFICE SYSTEM PROCESSING FEE—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 

2025 

(no change) 

2026 

(no change) 

2027 

(no change) 2028 2029 

Branch Office System Processing Fee 

(initial and annual) ................................ $75 $75 $75 $75 $105 $105 

When the proposed branch office 

system processing fee change is fully 

implemented, it is designed to generate 

$4 million in annual revenue by 2029.44

FINRA would continue to waive, for one 

branch office per member per year, 

payment of the annual branch office 

system processing fee, but increase the 

amount of the waiver from $75 to $105 

to match the new rates. FINRA believes 

these proposed increases to the branch 

office fees, which relate to firm size and 

structure, are consistent with the 

proportional approach to fee increases 

discussed throughout this filing. 

Registration Fees 

Registration fees are registered 

person-level fees that, while use-based, 

also correlate to the third critical 

component of FINRA’s regulatory 

costs—the number and role of registered 

persons at a firm. Section 4 of Schedule 

A to the FINRA By-Laws establishes fees 

connected to FINRA’s operation of the 

Central Registration Depository (‘‘Web 

CRD®’’ or ‘‘CRD system’’), the central 

licensing and registration system that 

FINRA operates for the benefit of 

FINRA, the SEC, other SROs, state 

securities regulators, and broker-dealer 

firms. The CRD system contains the 

registration records of broker-dealer 

firms and their associated individuals 

including their qualification, 

employment, and disclosure histories; it 

also facilitates the processing of, among 

other things, form filings and facilitates 

the making of fingerprint results 

available to the appropriate authorized 

recipients.45 The CRD system enables 

individuals and firms seeking 

registration with multiple states and 

SROs to do so by submitting a single 

form and fee payment.46

FINRA last increased associated 

registration fees between 2022 and 

2024.47 FINRA has explained that these 

fees are important to fund activities that 

help ensure the integrity of information 

in the CRD system—information critical 

to FINRA and other regulators, as well 

as to investors through BrokerCheck— 

and to support FINRA’s overall 

regulatory mission.48 FINRA is 

proposing to increase certain 

registration fees 49 in 2028 as follows: 

REGISTRATION FEES—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 

2025 

(no change) 

2026 

(no change) 

2027 

(no change) 2028 2029 

Initial/Transfer Registration 

Form U4 filing 50.

$125 ................ $125 .................. $125 .................. $125 .................. $175 ................ $175. 

Termination U5 filing ................. $50 (plus $100 

if late filed).

$50 (plus $100 if 

late filed).

$50 (plus $100 if 

late filed).

$50 (plus $100 if 

late filed).

$70 (plus $140 

if late filed).

$70 (plus $140 

if late filed). 

Disclosure review 51 .................. $155 ................ $155 .................. $155 .................. $155 .................. $215 ................ $215. 

Electronic Fingerprinting 52 ....... $20 53 .............. $20 54 ................ $20 .................... $20 .................... $28 .................. $28. 

Non-Electronic Fingerprinting 55 $30 .................. $30 .................... $30 .................... $30 .................... $42 .................. $42. 

Fingerprinting Processed 

Through Another SRO.

$30 .................. $30 .................... $30 .................... $30 .................... $42 .................. $42. 

When these proposed registration fee 

changes are fully implemented, they are 

designed to generate an additional $10 

million in annual revenue by 2029. 

Renewal Late Fee 

Members renew their registrations 

with FINRA, other SROs and states/ 

jurisdictions during the annual renewal 

program. Section 4(b)(8) of Schedule A 

to the FINRA By-Laws sets forth the 

renewal late fee, which applies if a 

member fails to timely pay the amount 


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56Members receive a preliminary annual renewal 

statement that reflects approved registrations at the 

time the statement is generated. The statement also 

includes a date by which members must make full 

payment available to FINRA. 57See Securities Exchange Act Release No. 46466 

(September 6, 2002), 67 FR 58092 (September 13, 

2002) (Notice of Filing and Immediate Effectiveness 

of File No. SR–NASD–2002–100). 

58See Regulatory Notice 12–32, supra note 41. 

59FINRA also proposes conforming changes to 

Section 15(e) of Schedule A to the FINRA By-Laws 

to align this proposed fee change with the same fee 

for Funding Portal members. 

60Projected revenue from the proposed increased 

Late Disclosure Fees assumes approximately 53% 

late filings based on the historical average (2018– 

2023) and is based on other reasonably conservative 

assumptions using a variety of information points, 

including historical data and anticipated trends. 

See supra note 15. 

61The term broker-dealer agent (or AG) is the 

designation used in Form U4 to identify a person 

who has been approved to sell securities in a 

particular jurisdiction. 

indicated on its preliminary annual 

renewal statement.56 Where this late fee 

applies, FINRA includes it as part of the 

final statement. Currently, this fee is the 

greater of 10 percent of the member’s 

final annual renewal assessment or 

$100, with a maximum charge of $5,000. 

FINRA has not increased the renewal 

late fee since it was established in 

2002.57

FINRA is proposing to increase the 

renewal late fee in 2028 as follows: 

RENEWAL LATE FEE—PROPOSED IMPLEMENTATION

[The Renewal Late Fee is 10 percent of a member’s cumulative final renewal statement with the following minimums and maximums] 

Fee 2024 

(current) 

2025 

(no change) 

2026 

(no change) 

2027 

(no change) 2028 2029 

The minimum late fee FINRA will assess 

is ........................................................... $100 $100 $100 $100 $140 $140 

The maximum late fee FINRA will assess 

is ........................................................... 5,000 5,000 5,000 5,000 7,000 7,000 

FINRA notes that it collects all 

applicable renewal fees on behalf of 

itself and participating regulators, 

which enables members to submit their 

total renewal payment to FINRA instead 

of to each regulator. Among other 

reasons noted, FINRA believes this 

proposed fee increase would further 

encourage members to submit such fees 

on time. When the proposed renewal 

late fee changes are fully implemented, 

they are designed to generate an 

additional $100,000 in annual revenue 

by 2029. 

Late Disclosure Fee 

Related to the registration functions 

described above, FINRA charges a fee 

for each day that a new disclosure event 

or a change in the status of a previously 

reported disclosure event is not timely 

filed on an initial or amended Form U5 

or an amended Form U4. Section 4(h) of 

Schedule A to the FINRA By-Laws sets 

forth the late disclosure fee. This fee is 

assessed starting on the day following 

the last date on which the event or 

change in status was required to be 

reported. 

Timely and complete reporting of all 

information required by the FINRA ByLaws and rules, as well as the federal 

securities laws, is critical to investor 

protection. The SEC, FINRA, other SROs 

and state securities regulators use the 

information to make licensing and 

registration decisions, among other 

things. FINRA also publishes 

information in FINRA BrokerCheck, 

which investors use for researching the 

professional backgrounds of firms and 

brokers. 

FINRA has not increased the late 

disclosure fee since 2013.58 Currently, 

disclosures filed more than 60 days 

following the last date on which the 

event was required to be reported under 

FINRA rules account for 50 percent of 

volume and 78 percent of revenues 

related to late filing fees. 

FINRA is proposing to increase the 

late disclosure fee 59 in 2026 as follows: 

LATE DISCLOSURE FEE—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

First Day ................................................... $100 $100 $100 $100 $100 $100 

Subsequent Days ..................................... 25 25 40 40 40 40 

Maximum Fee .......................................... 1,575 1,575 2,460 2,460 2,460 2,460 

FINRA believes this proposed fee 

increase would further encourage firms 

to file timely and complete initial Forms 

U4 and U5 and amendments to these 

forms, while also generating additional 

revenue as part of the overall proposal 

to increase fees to fund FINRA’s 

regulatory mission. When the proposed 

late disclosure fee changes are fully 

implemented, they are designed to 

generate an additional $3 million in 

annual revenue by 2029.60

System Processing Fee 

FINRA currently assesses an annual 

system processing fee for each of the 

member’s registered persons. Like the 

registration fees described above, this 

fee correlates to the third critical 

component of FINRA’s regulatory 

costs—the number and role of registered 

persons at a firm. Section 4(b)(7) of 

Schedule A to the FINRA By-Laws sets 

forth the system processing fee. Under 

the current fee structure, a flat $70 fee 

applies to each registered person of a 

member. Many registered persons are 

registered with one or more securities 

regulators (i.e., with jurisdictions as a 

broker-dealer agent and with SROs as a 

representative or principal).61 The 

median number of other SROs and 

jurisdictions with which each registered 

person of a member is registered, in 

addition to their FINRA registration, is 

11, with an average of 20. 

FINRA’s costs and resources allocated 

to processing this information for 

members’ registered persons depends, 

in part, on the number of securities 

regulators with which each registered 

person is registered (whether as a 

broker-dealer agent with one or more 


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62FINRA also administers and delivers 

examinations sponsored (i.e., developed) by the 

Municipal Securities Rulemaking Board (‘‘MSRB’’) 

and other SROs, the North American Securities 

Administrators Association, and the Federal 

Deposit Insurance Corporation. The fees charged for 

these examinations are set according to contracts 

with the examination sponsors, and FINRA is not 

proposing any changes to fees associated with those 

examinations at this time. 

63See Order Approving SR–FINRA–2020–032, 

supra note 6, 85 FR 66592. 

jurisdictions or as a representative or 

principal with one or more SROs). To 

account for this variability, FINRA 

proposes to replace the current flat fee 

structure with a tiered rate structure in 

2026 as described below. In addition, 

FINRA proposes to increase the 

proposed tiers in 2028. These proposed 

changes are summarized as follows: 

SYSTEM PROCESSING FEE—PROPOSED IMPLEMENTATION

Number of securities regulators with 

which each registered person of a member is registered, excluding registration 

as an investment adviser representative 

2024 

(current) 

2025 

(no change) 2026 2027 (no change) 2028 2029 (no change) 

1–5 ........................................................... $70 $70 $70 $70 $100 $100 

6–20 ......................................................... 70 70 95 95 125 125 

21–40 ....................................................... 70 70 110 110 140 140 

41+ ........................................................... 70 70 125 125 155 155 

The fee would be calculated based on 

the total number of securities regulators 

with which each registered person of a 

member is registered (whether as a 

broker-dealer agent with one or more 

jurisdictions or as a representative or 

principal with one or more SROs). A 

registered person’s registration as an 

investment adviser representative 

would not be considered. 

FINRA believes this use-based fee will 

support FINRA’s overall regulatory 

mission while reflecting the resources 

FINRA allocates to its securities 

licensing and registration operations for 

registered persons of members. Further, 

as noted above, this fee relates to the 

number and role of registered persons at 

a firm, which is one of the three critical 

components of FINRA’s regulatory 

costs. 

FINRA proposes to implement the 

proposed tiered rate structure in 2026. 

To allow members additional time to 

adjust and plan, FINRA proposes to 

defer implementation of proposed 

increases to this fee until 2028. When 

this proposed rule change, including 

implementation of the tiered structure 

and the proposed increase are fully 

implemented, it is designed to generate 

an additional $31 million in annual 

revenue by 2029. 

Qualification Examination Fees 

Like registration fees, qualification 

examination fees are registered personlevel fees that, while use-based, also 

correlate to the third critical component 

of FINRA’s regulatory costs—the 

number and role of registered persons at 

a firm. Section 4(c) of Schedule A to the 

FINRA By-Laws sets forth the fees 

associated with the qualification 

examinations that FINRA administers. 

Persons engaged in the investment 

banking or securities business of a 

FINRA member who function as 

principals or representatives are 

required to register with FINRA in each 

category of registration appropriate to 

their functions. Such individuals must 

pass an appropriate qualification 

examination or obtain a waiver before 

their registration can become effective. 

These qualification examinations cover 

a broad range of subjects regarding 

financial markets and products, 

individual responsibilities, securities 

industry rules, and regulatory structure. 

FINRA develops, maintains, and 

delivers all qualification examinations 

for individuals who are registered or 

seeking registration with FINRA.62

FINRA last increased its examination 

fees between 2022 and 2024.63 FINRA is 

proposing to increase its examination 

fees in 2026 as follows: 

QUALIFICATION EXAMINATION FEES—PROPOSED IMPLEMENTATION

Examination number and name 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

Securities Industry Essentials (SIE) Examination .............................................. $80 $80 $100 $100 $100 $100 

Series 4: Registered Options Principal 

Examination .......................................... 155 155 200 200 200 200 

Series 6: Investment Company Products 

and Variable Contracts Representative 

Examination .......................................... 75 75 100 100 100 100 

Series 7: General Securities Representative Examination ................................... 300 300 395 395 395 395 

Series 9: General Securities Sales Supervisor Examination—Options Module 130 130 175 175 175 175 

Series 10: General Securities Sales Supervisor Examination—General Module 175 175 235 235 235 235 

Series 14: Compliance Official Examination ........................................................ 350 350 450 450 450 450 

Series 16: Supervisory Analyst Examination ........................................................ 245 245 325 325 325 325 

Series 22: Direct Participation Programs 

Representative Examination ................ 60 60 100 100 100 100 

Series 23: General Securities Principal 

Examination—Sales Supervisor Module ......................................................... 105 105 135 135 135 135 


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64See FINRA Rule 1240. 

65See FINRA Rule 1240; see also Securities 

Exchange Act Release No. 93097 (September 21, 

2021), 86 FR 53358 (September 27, 2021) (Order 

Approving File No. SR–FINRA–2021–015). 

66See Securities Exchange Act Release No. 75581 

(July 31, 2015), 80 FR 47018 (August 6, 2015) 

(Order Approving File No. SR–FINRA–2015–015). 

After FINRA adopted amendments to require 

registered persons to complete the Regulatory 

Element of CE annually rather than every three 

years, FINRA revised the Regulatory Element fee 

from a $55 fee paid once every three years, to an 

$18 fee paid annually. See Securities Exchange Act 

Release No. 93928 (January 7, 2022), 87 FR 2193, 

2194 (January 13, 2022) (Notice of Filing and 

Immediate Effectiveness of File No. SR–FINRA– 

2021–034). Thus, the Regulatory Element fee has 

not substantially changed since 2015. 

QUALIFICATION EXAMINATION FEES—PROPOSED IMPLEMENTATION—Continued 

Examination number and name 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

Series 24: General Securities Principal 

Examination .......................................... 175 175 235 235 235 235 

Series 26: Investment Company Products and Variable Contracts Principal 

Examination .......................................... 150 150 200 200 200 200 

Series 27: Financial and Operations Principal Examination ................................. 175 175 235 235 235 235 

Series 28: Introducing Broker-Dealer Financial and Operations Principal Examination .............................................. 150 150 195 195 195 195 

Series 39: Direct Participation Programs 

Principal Examination ........................... 100 100 200 200 200 200 

Series 57: Securities Trader Examination 80 80 105 105 105 105 

Series 79: Investment Banking Representative Examination ....................... 300 300 395 395 395 395 

Series 82: Private Securities Offering 

Representative Examination ................ 60 60 100 100 100 100 

Series 86: Research Analyst Examination—Analysis ....................................... 225 225 295 295 295 295 

Series 87: Research Analyst Examination—Regulatory ................................... 150 150 195 195 195 195 

Series 99: Operations Professional Examination .............................................. 60 60 100 100 100 100 

FINRA is proposing a one-time fee 

increase across examinations in 2026 

designed to generate an additional $14 

million in revenue across all 

examinations by 2029. In addition, 

FINRA has determined the amount of 

each examination fee increase based on 

the frequency with which the 

examination is administered, as well as 

the average fee per hour of examination 

length. Examinations that are 

administered more frequently or are 

longer in duration typically require 

more effort and cost to develop, 

maintain, and update. As a result, 

FINRA is generally proposing greater 

increases for those examinations, and 

smaller increases for others to preserve 

the broad and equitable distribution of 

proposed fee increases, as discussed 

throughout this filing. 

Continuing Education Regulatory 

Element Fee 

Continuing education fees are also 

registered person-level fees that, while 

use-based, correlate to the third critical 

component of FINRA’s regulatory 

costs—the number and role of registered 

persons at a firm. In conjunction with 

other SROs and the Securities Industry/ 

Regulatory Council on Continuing 

Education, FINRA administers the 

continuing education (CE) program for 

the securities industry.64 The 

Regulatory Element of the CE program 

provides training on significant rule 

changes and other regulatory 

developments relevant to each 

registration category. Registered persons 

must complete the Regulatory Element 

annually by December 31 for each 

registration that they hold.65

Section 4(f) of Schedule A to the 

FINRA By-Laws sets forth the fees 

associated with the Regulatory Element 

requirement. FINRA has not increased 

the fee for the web-based delivery of the 

Regulatory Element since it was 

established in 2015.66 FINRA is 

proposing to increase the Regulatory 

Element fee in 2026 as follows: 

CONTINUING EDUCATION FEE—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 

2025 

(no change) 2026 2027 2028 2029 

Continuing Education ............................... $18 $18 $25 $25 $25 $25 

When the proposed regulatory 

element fee rate is fully implemented, it 

is designed to generate an additional $4 

million in annual revenue by 2029. 

Select Use-Based Fees 

Corporate Financing Private Placement 

Review Fee 

FINRA Rule 5122 (Private Placements 

of Securities Issued by Members) 

imposes requirements regarding 

disclosure, filing, and use of offering 

proceeds for members that sell a private 

placement of securities issued by a 

member or a control entity, subject to 

various exemptions. Pursuant to FINRA 

Rule 5122, members that offer or sell 

their own securities or those of a control 


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67FINRA Rule 5122 became effective on June 17, 

2009; FINRA Rule 5123 became effective on 

December 3, 2012. 68See Regulatory Notice 23–08 (May 2023) (‘‘In 

recent years, the unregistered offering market 

outpaced the public market. . . . In 2021, for 

example, members submitted over 3,800 unique 

filings for private placements pursuant to FINRA 

Rules 5122 and 5123, which require filings for 

private placements generally sold to individuals, in 

comparison to roughly 2,000 submissions in 

2013.’’). 

69FINRA’s belief is informed by its experience 

with the public offering fee, described below, and 

based on discussions with FINRA advisory 

committees and other industry participants. 

70As discussed above, when applying use-based 

fees, FINRA takes into account direct costs for the 

program, indirect costs for the program, and a 

contribution to FINRA’s overall regulatory 

operations. See supra note 7 and accompanying 

text. 

71The SEC’s current filing fee rate for filings 

made pursuant to Sections 6(b) of the Securities Act 

of 1933 and Sections 13(e) and 14(g) of the 

Exchange Act is $147.60 per $1,000,000. See 

https://www.sec.gov/edgar/filer/filing-fees/filingfee-rate. 

72See Securities Exchange Act Release No. 67241 

(June 22, 2012), 77 FR 38698 (June 28, 2012) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–FINRA–2012–029); see also Regulatory Notice 

12–32 (June 2012). 

entity must file with FINRA’s Corporate 

Financing Department (‘‘Corporate 

Financing’’) a private placement 

memorandum, term sheet or other 

offering document and any retail 

communication that promotes or 

recommends the member private 

offering at or prior to the first time the 

documents are provided to any 

prospective investor. 

Its companion rule, FINRA Rule 5123 

(Private Placement of Securities), 

requires members that sell any other 

type of private placement to file with 

Corporate Financing a copy of any 

private placement memorandum, term 

sheet or other offering document, and 

any retail communication that promotes 

or recommends the private placement. 

Such filing must occur within 15 

calendar days of the first sale, subject to 

various exemptions. 

FINRA has historically performed the 

review of such filings at no cost since 

the program was created approximately 

15 years ago.67 This program requires 

substantial resources, and the volume of 

filings has increased significantly in 

recent years.68 FINRA thus proposes to 

establish the following fees related to 

private placement review in July 2025 

as follows: 

CORPORATE FINANCING PRIVATE PLACEMENT REVIEW FEE—PROPOSED IMPLEMENTATION

Private placements (offerings >$25M) 2024 

(current) 

2025 

(effective 

7/1/25) 

(million) 

2026 

(million) 

2027 

(million) 

2028 

(million) 

2029 

(million) 

Flat Fee .................................................... $0 $300 $300 $300 $300 $300 

% of Offering ............................................ 0% 0.008% 0.008% 0.008% 0.008% 0.008% 

Offering Cap ............................................. $0 $500 $500 $500 $500 $500 

The proposed fee is designed to be 

similar to the current fee for public 

offering reviews. Like the public 

offering review fee, this proposed fee 

would consist of both a flat fee and a 

percentage of the maximum offering 

proceeds. However, to reduce the 

impact on smaller issuers and brokerdealers, FINRA proposes to apply this 

fee only to private placement offerings 

of greater than $25 million and to cap 

the fee at $40,300 (0.008% of 

$500,000,000 offering + $300 flat fee). In 

general, FINRA believes that such fees 

would be paid for by, or passed through 

to, issuers.69 This proposed new usebased fee is structured to take into 

account associated types of costs, 

including the substantial resources such 

reviews require.70 When the proposed 

new fee for private placement review is 

fully implemented, it is designed to 

generate $6 million in annual revenue 

by 2029. 

Corporate Financing Public Offering 

Review Fee 

Corporate Financing reviews the 

underwriting terms and arrangements of 

proposed public offerings of securities 

for compliance with the requirements of 

FINRA Rule 5110 (Corporate Financing 

Rule—Underwriting Terms and 

Arrangements). Pursuant to Rule 5110, 

no member firm or person associated 

with a member firm may participate in 

a public offering subject to the rule, or 

to FINRA Rules 5121 (Public Offerings 

of Securities With Conflicts of Interest) 

and 2310 (Direct Participation 

Programs), unless the documents and 

information specified in the rule have 

been filed with and reviewed by 

Corporate Financing. The documents 

Corporate Financing reviews include 

registration statements, underwriting 

agreements, engagement letters and 

other relevant supporting 

documentation for public offerings. 

Corporate Financing’s review is 

complementary to the SEC’s registration 

process, which covers a larger set of 

filings than FINRA’s program.71

Section 7 of Schedule A to the FINRA 

By-Laws sets forth the fees associated 

with filing documents pursuant to the 

Corporate Financing Rule. It currently 

provides for a flat fee of $500 plus 

.015% of the proposed maximum 

aggregate offering price or other 

applicable value of all securities 

registered on an SEC registration 

statement or included on any other type 

of offering document (where not filed 

with the SEC), with a cap of $225,500; 

or a fee of $225,500 for an offering of 

securities filed with the SEC and offered 

pursuant to Securities Act Rule 415 by 

a Well-Known Seasoned Issuer 

(‘‘WKSI’’) as defined in Securities Act 

Rule 405. The fee associated with any 

amendment or other change to the 

documents initially filed with Corporate 

Financing is also subject to the current 

$225,500 cap. FINRA has not raised the 

fee cap since 2012.72

FINRA is proposing to increase and 

modify the fee cap beginning in July 

2025 as follows: 


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73See supra note 71. 

74See supra note 69. 

75The proposed rule change would remove the 

language ‘‘on an automatically effective Form S–3 

or F–3 registration statement’’ because WKSIs may 

use other registration forms. See, e.g., Securities 

Offering Reform for Closed-End Investment 

Companies, Investment Company Act Release No. 

33836 (April 8, 2020), 85 FR 33290 (June 1, 2020). 

76See generally FINRA Rule 2200 Series. FINRA 

also will review communications filed voluntarily. 

77See Securities Exchange Act Release No. 67239 

(June 22, 2012), 77 FR 38692 (June 28, 2012) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–FINRA–2012–028). 

78FINRA currently charges a $10 fee for the 

review of each printed page or web page in excess 

of 10 pages, and for each minute of tape reviewed 

in excess of 10 minutes of video or audio media. 

This would not change under the proposed rule 

change. 

79The Customer Code is the FINRA Rule 12000 

Series; the Industry Code is the FINRA Rule 13000 

Series. The proposed fee increases described, 

below, would be implemented in both Codes. 

80See Securities Exchange Act Release No. 90227 

(October 20, 2020), 85 FR 67794 (October 26, 2020) 

(Notice of Filing File No. SR–FINRA–2020–035). 

81See FINRA Rules 12902(a)(1) and 13902(a)(1). 

CORPORATE FINANCING PUBLIC OFFERING REVIEW FEE CAP—PROPOSED IMPLEMENTATION

IPO 2024 

(current) 

2025 

(effective 

7/1/25) 

2026 2027 2028 2029 

Non-WKSI ................................................ $225,000 $1,125,000 $1,125,000 $1,125,000 $1,125,000 $1,125,000 

WKSI ........................................................ 225,000 270,000 324,000 389,000 467,000 560,000 

This proposed rule change would 

raise the fee cap to $1,125,000, which 

would account for the significant 

growth in the size of offerings since the 

cap was last raised in 2012. However, 

for WKSIs, the cap would be raised to 

$560,000 over a period of five years. 

FINRA notes that raising the caps would 

also create more consistency with the 

SEC IPO review fee, which has no cap.73

FINRA projects that increasing the cap 

as proposed would capture 81% of the 

incremental revenues if there were no 

cap while bounding the impact on 

WKSIs whose offerings tend to be less 

resource intensive for Corporate 

Financing to review. FINRA believes 

such fees are and would continue to be 

paid for by, or passed through to, 

issuers.74 When the proposed fee 

increase is fully implemented, it is 

designed to generate an additional $31 

million in annual revenue by 2029.75

Advertising Regulation Review Fee 

One way that FINRA protects 

investors is by having its Advertising 

Regulation Department review specified 

broker-dealers’ communications for 

compliance with FINRA’s 

communications with the public rules, 

and similar rules of 76 the SEC, MSRB 

and Securities Investor Protection 

Corporation. FINRA rules require that 

member communications be based on 

principles of fair dealing and good faith, 

be fair and balanced, and provide a 

sound basis for evaluating the facts in 

regard to any particular security or type 

of security, industry or service. Among 

other things, FINRA rules prohibit 

member firm communications from 

including false, exaggerated, 

unwarranted or misleading statements 

or claims. 

Section 13 of Schedule A to the 

FINRA By-Laws sets forth the fees 

associated with review of 

communications filed with FINRA. 

Despite rising costs to administer the 

Advertising Regulation Department 

review program, FINRA has not 

increased these fees since 2012.77

FINRA is proposing an increase to the 

regular review charge in 2025 as 

follows: 

ADVERTISING REGULATION REVIEW—PROPOSED IMPLEMENTATION

Fee 2024 

(current) 2025 2026 2027 2028 2029 

Regular Review Charge (non-expedited) $125 $300 $300 $300 $300 $300 

When the proposed fee increase is 

fully implemented, it is designed to 

generate an additional $11 million in 

annual revenue by 2029.78 Under the 

proposed rule change, the $600 

expedited fee would not change. 

Dispute Resolution Services Arbitration 

Fees 

DRS operates the largest securities 

arbitration forum in the United States, 

to assist in the resolution of disputes 

involving customers, members and 

associated persons. As discussed in turn 

below, FINRA proposes to raise the (1) 

hearing session fees, (2) filing fees, (3) 

member surcharge, and (4) member 

process fee, as set forth in the Code of 

Arbitration Procedure for Customer 

Disputes (‘‘Customer Code’’) and Code 

of Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’) (together, 

the ‘‘Codes’’).79

FINRA believes that the cost of 

arbitration should be borne by the users 

of the forum, without imposing a 

significant barrier to public customers 

who bring arbitration claims to the 

forum. Thus, the current DRS arbitration 

fees are designed to be borne 85 percent 

by members and 15 percent by 

customers.80 The proposed rule change 

would maintain that pricing structure. It 

would also maintain a sliding scale fee 

structure in which the member 

surcharge and process fees increase 

across the board, while the hearing 

session fees and filing fees increase 

more for higher value claims. Taken 

together, the proposed increase in DRS’ 

arbitration fees would aim to partially 

recover increasing costs to operate the 

forum, without placing an undue 

burden on users of the forum, 

particularly customers or claimants with 

small claims. When the proposed DRS 

arbitration fee increases are fully 

implemented, they are designed to 

generate an additional $10 million in 

annual revenue by 2029. 

Hearing Session Fees 

Under FINRA Rules 12902 and 13902, 

hearing session fees are charged for each 

hearing session based on the amount in 

dispute. In the award, the panel 

determines the amount of each hearing 

session fee that each party must pay. 

The arbitrators may apportion the fees 

in any manner, including assessing the 

entire amount against one party.81

FINRA proposes to raise hearing 

session fees in 2025 as follows: 


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82See FINRA Rules 12701 and 13701. 83See FINRA Rules 12701(b) and 13701(b). 84See FINRA Rules 12902(a)(1) and 13902(a)(1). 

HEARING SESSION FEES—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 (current) 2025–2029 

Hearing 

session w/ 

one 

arbitrator 

Hearing 

session w/ 

three 

arbitrators 

Hearing 

session w/ 

one 

arbitrator 

Hearing 

session w/ 

three 

arbitrators 

Up to $2,500 ................................................................................................... $50 N/A $50 N/A 

$2,500.01 to $5,000 ........................................................................................ 125 N/A 125 N/A 

$5,000.01 to $10,000 ...................................................................................... 250 N/A 250 N/A 

$10,000.01 to $25,000 .................................................................................... 450 N/A 450 N/A 

$25,000.01 to $50,000 .................................................................................... 450 $600 450 $600 

$50,000.01 to $100,000 .................................................................................. 450 750 450 750 

$100,000.01 to $500,000 ................................................................................ 450 1,125 675 1,690 

$500,000.01 to $1,000,000 ............................................................................. 450 1,325 675 1,990 

$1,000,000.01 to $5,000,000 .......................................................................... 450 1,435 675 2,160 

Over $5,000,000 ............................................................................................. 450 1,575 675 2,370

Non-Monetary/Not Specified ........................................................................... 450 1,150 675 1,725 

To minimize the impact of the 

proposed rule change on customers or 

claimants with small claims, the 

proposed fee increase would only apply 

to claims of more than $100,000 and 

claims for non-monetary or unspecified 

damages. The tiered structure of this fee 

would not change under the proposed 

rule change. 

FINRA notes the hearing session fee 

may not be assessed under certain 

circumstances. For example, if the 

parties timely settle the arbitration, the 

parties will not be assessed hearing 

session fees.82 During settlement 

negotiations, parties have the 

opportunity to determine how to share 

any hearing session fees, if hearings are 

held.83 For cases that result in an award, 

the panel has discretion to assess 

hearing session fees as part of the 

award,84 which allows them to consider 

numerous factors to determine each 

party’s appropriate share and assign the 

costs accordingly. The proposed rule 

change would not change a party’s 

ability to settle or arbitrators’ discretion 

to assess the hearing session fees. 

Filing Fees 

Filing Fees Paid by Customers, 

Associated Persons or Other NonMembers 

Filing fees are due when a claim is 

filed. FINRA Rule 12900(a) sets forth the 

filing fee schedule for customers, 

associated persons and other nonmembers who file a claim, 

counterclaim, cross claim or third party 

claim in a customer dispute. FINRA 

Rule 13900(a) sets forth the filing fee 

schedule for associated persons who file 

a claim, counterclaim, cross claim or 

third party claim in an industry dispute. 

The filing fee is based on the claim 

amount or type of damages requested. 

FINRA proposes to raise filing fees in 

2025 as follows: 

FILING FEE (CUSTOMERS, ASSOCIATED PERSONS, AND OTHER NON-MEMBERS)—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

$.01 to $1,000 .......................................... $50 $50 $50 $50 $50 $50 

$1,000.01 to $2,500 ................................. 75 75 75 75 75 75 

$2,500.01 to $5,000 ................................. 175 175 175 175 175 175 

$5,000.01 to $10,000 ............................... 325 325 325 325 325 325 

$10,000.01 to $25,000 ............................. 425 425 425 425 425 425 

$25,000.01 to $50,000 ............................. 600 600 600 600 600 600 

$50,000.01 to $100,000 ........................... 975 975 975 975 975 975 

$100,000.01 to $500,000 ......................... 1,425 1,790 1,790 1,790 1,790 1,790 

$500,000.01 to $1,000,000 ...................... 1,740 2,175 2,175 2,175 2,175 2,175 

$1,000,000.01 to $5,000,000 ................... 2,025 2,540 2,540 2,540 2,540 2,540 

Over $5,000,000 ...................................... 2,300 2,875 2,875 2,875 2,875 2,875 

Non-Monetary/Not Specified .................... 1,600 2,000 2,000 2,000 2,000 2,000 

To minimize the impact of the 

proposed rule change on customers or 

claimants with small claims, and 

consistent with the current claim 

amount tier structure, the proposed fee 

increase would only apply to claims of 

more than $100,000 and claims for nonmonetary or unspecified damages. The 

tiered structure of this fee would not 

change under the proposed rule change. 

Filing Fees Paid by Members 

FINRA Rules 12900(b) and 13900(b) 

set forth the filing fee schedule for 

members filing a claim, counterclaim, 

cross claim, or third party claim in 

customer and industry cases, 

respectively. FINRA proposes to 

increase the member filing fee in 2025 

as follows: 


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85See FINRA Rules 12901(a)(6) and 13901(f). 

FILING FEE (MEMBERS)—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

$.01 to $1,000 .......................................... $225 $225 $225 $225 $225 $225 

$1,000.01 to $2,500 ................................. 350 350 350 350 350 350 

$2,500.01 to $5,000 ................................. 525 525 525 525 525 525 

$5,000.01 to $10,000 ............................... 750 750 750 750 750 750 

$10,000.01 to $25,000 ............................. 1,050 1,050 1,050 1,050 1,050 1,050 

$25,000.01 to $50,000 ............................. 1,450 1,450 1,450 1,450 1,450 1,450 

$50,000.01 to $100,000 ........................... 1,750 1,750 1,750 1,750 1,750 1,750 

$100,000.01 to $500,000 ......................... 2,125 2,660 2,660 2,660 2,660 2,660 

$500,000.01 to $1,000,000 ...................... 2,650 3,320 3,320 3,320 3,320 3,320 

$1,000,000.01 to $5,000,000 ................... 3,550 4,440 4,440 4,440 4,440 4,440 

Over $5,000,000 ...................................... 4,200 5,250 5,250 5,250 5,250 5,250 

Non-Monetary/Not Specified .................... 1,800 2,250 2,250 2,250 2,250 2,250 

Partial Refund of Filing Fee 

If a claim is settled or withdrawn 

more than 10 days before the date of the 

hearing on the merits, a party paying a 

filing fee will receive a partial refund of 

the filing fee in the amount specified 

under FINRA Rule 12900(c) for 

customer cases and FINRA Rule 

13900(c) for industry cases. FINRA 

proposes to increase the partial filing fee 

refund in 2025 as follows: 

PARTIAL FILING FEE REFUND—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

$.01 to $1,000 .......................................... $25 $25 $25 $25 $25 $25 

$1,000.01 to $2,500 ................................. 50 50 50 50 50 50 

$2,500.01 to $5,000 ................................. 125 125 125 125 125 125 

$5,000.01 to $10,000 ............................... 250 250 250 250 250 250 

$10,000.01 to $25,000 ............................. 300 300 300 300 300 300 

$25,000.01 to $50,000 ............................. 450 450 450 450 450 450 

$50,000.01 to $100,000 ........................... 750 750 750 750 750 750 

$100,000.01 to $500,000 ......................... 1,125 1,410 1,410 1,410 1,410 1,410 

$500,000.01 to $1,000,000 ...................... 1,300 1,625 1,625 1,625 1,625 1,625 

$1,000,000.01 to $5,000,000 ................... 1,400 1,750 1,750 1,750 1,750 1,750 

Over $5,000,000 ...................................... 1,500 1,875 1,875 1,875 1,875 1,875 

Non-Monetary/Not specified .................... 1,200 1,500 1,500 1,500 1,500 1,500 

Member Surcharge 

FINRA assesses a surcharge against 

each member that (a) files a claim, 

counterclaim, cross claim or third party 

claim under the Codes; (b) is named as 

a respondent in a claim, counterclaim, 

cross claim, or third party claim filed 

and served under the Codes; or (c) 

employed, at the time the dispute arose, 

an associated person who is named as 

a respondent in a claim, counterclaim, 

cross claim, or third party claim filed 

and served under the Codes. 

FINRA Rules 12901 and 13901 set 

forth the schedule of the member 

surcharge, which is assessed based on 

the amount of the claim, exclusive of 

interest and expenses. The member is 

assessed one surcharge per arbitration 

case.85 Member surcharges are intended 

to allocate the costs of administering the 

arbitration case to the firms that are 

involved in those cases. Thus, each 

member is assessed a member 

surcharge, based on the aggregate claim 

amount, when it is brought into the 

case, whether through a claim, 

counterclaim, cross claim or third party 

claim. The member surcharge is the 

responsibility of the member party and 

cannot be allocated to any other party 

(‘‘non-allocable’’). 

FINRA proposes to increase the 

member surcharge in 2025 as follows: 

MEMBER SURCHARGE—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

$.01 to $5,000 .......................................... $150 $165 $165 $165 $165 $165 

$5,000.01–$10,000 .................................. 325 360 360 360 360 360 

$10,000.01–$25,000 ................................ 450 495 495 495 495 495 

$25,000.01–$50,000 ................................ 750 975 975 975 975 975 

$50,000.01–$100,000 .............................. 1,100 1,430 1,430 1,430 1,430 1,430 

$100,000.01–$250,000 ............................ 1,700 2,210 2,210 2,210 2,210 2,210 

$250,000.01–$500,000 ............................ 2,025 2,640 2,640 2,640 2,640 2,640 

$500,000.01–$1,000,000 ......................... 2,625 3,420 3,420 3,420 3,420 3,420 

$1,000,000.01–$5,000,000 ...................... 3,200 4,800 4,800 4,800 4,800 4,800 

$5,000,000.01–$10,000,000 .................... 3,850 5,775 5,775 5,775 5,775 5,775 


ddrumheller on DSK120RN23PROD with NOTICES1
93724 Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 

86See FINRA Rules 12903 and 13903. If a claim 

amount is $25,000 or less, the member would not 

be assessed any process fees. 87See FINRA Rules 12903(d) and 13903(d). See 

also FINRA Rules 12701(b) and 13701(b). 

88 12 CFR 220.4(c) and 220.8(d), respectively. 

89 17 CFR 240.15c3–3. 

90See Securities Exchange Act Release No. 53982 

(June 14, 2006), 71 FR 35720 (June 21, 2006) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–NASD–2006–063). See also Notice to Members 

06–30 (June 2006). 

MEMBER SURCHARGE—PROPOSED IMPLEMENTATION—Continued 

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

Over $10,000,000 .................................... 4,325 6,490 6,490 6,490 6,490 6,490 

Non-Monetary/Not Specified .................... 2,000 2,600 2,600 2,600 2,600 2,600 

The member surcharge would remain 

non-allocable under the proposed rule 

change and, therefore, would not result 

in any additional costs to other parties 

to the arbitration, including customers. 

Member Process Fee 

Under the Codes, each member that is 

a party to an arbitration or employed an 

associated person who is a party to an 

arbitration in which more than $25,000, 

exclusive of interest and expenses, is in 

dispute must pay a non-refundable 

process fee.86

FINRA Rules 12903 and 13903 set 

forth the process fee schedule. FINRA 

assesses the member the applicable 

process fee when the parties are sent the 

arbitrator lists or notification of the 

hearing. Like the member surcharge, the 

process fee is non-allocable to other 

parties to the arbitration.87

FINRA proposes to increase the 

process fee in 2025 as follows: 

MEMBER PROCESS FEE—PROPOSED IMPLEMENTATION

Amount of claim 

(exclusive of interest and expenses) 

2024 

(current) 2025 2026 2027 2028 2029 

$.01–$25,000 ........................................... $0 $0 $0 $0 $0 $0 

$25,000.01–$50,000 ................................ 1,750 2,275 2,275 2,275 2,275 2,275 

$50,000.01–$100,000 .............................. 2,250 2,925 2,925 2,925 2,925 2,925 

$100,000.01–$250,000 ............................ 3,250 4,225 4,225 4,225 4,225 4,225 

$250,000.01–$500,000 ............................ 3,875 5,040 5,040 5,040 5,040 5,040 

$500,000.01–$1,000,000 ......................... 5,225 6,800 6,800 6,800 6,800 6,800 

$1,000,000.01–$5,000,000 ...................... 6,375 9,570 9,570 9,570 9,570 9,570 

$5,000,000.01–$10,000,000 .................... 7,050 10,575 10,575 10,575 10,575 10,575 

Over $10,000,000 .................................... 7,300 10,950 10,950 10,950 10,950 10,950 

Non-Monetary/Not Specified .................... 3,850 5,005 5,005 5,005 5,005 5,005 

The member process fee would 

remain non-allocable under the 

proposed rule change and, therefore, 

would not result in any additional costs 

to other parties to the arbitration, 

including customers. 

Regulation T and Exchange Act Rule 

15c3–3(n) Requests for Extension of 

Time Fee 

Section 8 of Schedule A to the FINRA 

By-Laws governs the service charge for 

each extension of time request pursuant 

to Sections 220.4(c) and 220.8(d) of 

Regulation T88 of the Board of 

Governors of the Federal Reserve 

System (‘‘Regulation T’’) and Exchange 

Act Rule 15c3–3(n).89 FINRA has not 

increased this fee since 2006.90 FINRA 

proposes to raise the fee in 2025 as 

follows: 

REGULATION T AND EXCHANGE ACT RULE 15c3–3(n) REQUESTS FOR EXTENSION OF TIME—PROPOSED

IMPLEMENTATION

2024 

(current) 2025 2026 2027 2028 2029 

$4 per request ......... $8 per request ......... $8 per request ......... $8 per request ......... $8 per request ......... $8 per request. 

Based on current annual extension 

filing volumes, the current fee does not 

cover the estimated personnel and 

technology costs necessary to process 

extension requests. The proposal to 

increase the fee would recover some of 

those costs. When the proposed service 

charge for Regulation T and Exchange 

Act Rule 15c3–3(n) requests for 

extension of time increases are fully 

implemented, they are designed to 

generate an additional $640,000 in 

annual revenue by 2029. 

Further, to streamline Section 8, 

FINRA proposes to eliminate current 

paragraph (a), which is not needed in 

light of the specific fee amount language 

set forth in paragraph (b) of that Section. 

The proposed rule change would also 

make minor technical corrections. As 

such, the proposed rule change would 

amend Section 8 to read: ‘‘The service 

charge for processing each initial 

extension of time request and for all 

subsequent extension of time requests 

(1) involving the same transaction under 

Regulation T or (2) involving an 

extension of time previously granted 

pursuant to SEA Rule 15c3–3(n) shall be 

$8.00 per request.’’ 

Proposed Conforming Changes To Select 

Funding Portal Member Fees 

Section 15 of Schedule A to the 

FINRA By-Laws sets forth the fees that 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 93725 

91See Securities Exchange Act Release No. 76238 

(October 22, 2015), 80 FR 66342 (October 28, 2015) 

(Notice of Filing and Immediate Effectiveness of 

File No. SR–FINRA–2015–041). 

92See supra note 54. 

93 15 U.S.C. 78o–3(b)(5). 

94 15 U.S.C. 78o–3(b)(6). 

95The FINRA Board of Governors is composed of 

a mix of public and industry representatives and 

uses its diverse expertise to oversee management in 

the administration of FINRA’s affairs and the 

promotion of FINRA’s welfare, objectives, and its 

public service mission to protect investors and 

uphold the integrity of markets. 

96See GAO Report to Congressional Committees 

(November 2023), available at https://www.gao.gov/ 

assets/d24106578.pdf. 

govern funding portals that are FINRA 

members. These fees became effective in 

2016. At the time they were proposed, 

the funding portal fees related to 

eligibility proceedings and fingerprint 

processing, among others, were 

‘‘identical to those charged to brokerdealer members.’’ 91 Though 

amendments to the fees charged to 

broker-dealer members related to 

eligibility proceedings and fingerprint 

processing have since occurred, those 

same fees for funding portal members 

have not been amended, and thus, are 

no longer aligned. 

This proposed rule change would 

amend Section 15(f)(1) and Section 

15(g) to conform the fees for members 

that are funding portals with the same 

fees that are charged to broker-dealer 

members. Specifically, in 2025, the 

proposed rule change would raise the 

funding portal member fee for filing an 

application to initiate eligibility 

proceedings from $1,500 to $5,000 to 

conform with the same fee that 

currently applies to broker-dealer 

members. Also in 2025, the proposed 

rule change would raise the funding 

portal member fee for fingerprints 

submitted electronically from $15 to $20 

to conform with the same fee that 

currently applies to broker-dealer 

members.92

FINRA has filed the proposed rule 

change for immediate effectiveness. 

Implementation of the proposed rule 

change will be phased in gradually over 

a five-year period beginning on January 

1, 2025, with full implementation of all 

proposed fee changes by 2029. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(5) of the Act,93 which 

requires, among other things, that 

FINRA rules provide for the equitable 

allocation of reasonable dues, fees and 

other charges among members and 

issuers and other persons using any 

facility or system that FINRA operates 

or controls. FINRA further believes that 

the proposed rule change is consistent 

with the provisions of Section 15A(b)(6) 

of the Act, which requires, among other 

things, that FINRA rules are not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers.94

Reasonableness of the Proposed Fees 

As discussed above, FINRA’s 

longstanding approach to funding 

employs a variety of fees designed to 

meet FINRA’s overall costs. As a not-forprofit SRO with a diverse membership, 

FINRA designs its mix of fees to seek 

recovery of its overall regulatory costs in 

a manner that is fair, reasonable, and 

equitably allocated among FINRA’s 

members and users of FINRA’s services. 

As FINRA has explained in the past, it 

is not feasible to associate a direct 

affiliated revenue stream for each of its 

programs (for example, FINRA collects 

no revenues in connection with its 

examinations of members), and thus 

numerous operations and services must 

be funded by other revenue sources, 

which include both core regulatory fees 

and other use-based fees. FINRA 

continues to believe that its overall 

Commission-approved cost-based 

pricing structure is reasonable, achieves 

general equity across its membership, 

and correlates fees with those firm 

components that drive FINRA’s 

regulatory costs to the extent feasible. 

The reasonableness of this proposal is 

reinforced by three key cost discipline 

mechanisms: oversight, transparency, 

and rebates. 

First, FINRA’s funding and operations 

are subject to several layers of oversight, 

including by the FINRA Board of 

Governors 95 and the Commission. As 

discussed in FINRA’s 2024 annual 

budget summary, FINRA’s efforts to 

manage its expenses responsibly while 

appropriately funding its mission 

includes Board oversight of its annual 

budget, compensation, and capital 

initiatives. This oversight is 

spearheaded by key Board committees 

(such as its Finance, Operations and 

Technology Committee), and includes 

requirements for Board or relevant 

Committee approval with respect to 

various financial matters, such as the 

annual budget, the allocation and use of 

fine monies, the incurring of any 

expenses above certain pre-established 

thresholds, the amount of any annual 

merit or incentive compensation, and 

the compensation of certain key 

employees. The Board also relies on 

expert external consultants where 

appropriate. Notably, this Board 

oversight complements various staff 

level controls over routine costs, 

including expense policies that are 

enforced with systemic checks and 

escalating management approval 

requirements for expense requests, with 

the effectiveness of these policies 

further subject to review by FINRA’s 

Internal Audit Department. 

FINRA is also extensively supervised 

by the Commission throughout the year. 

The SEC’s Division of Examinations 

maintains dedicated staff as part of its 

FINRA and Securities Industry 

Oversight (‘‘FSIO’’) program who are 

devoted exclusively to overseeing 

FINRA and the MSRB—the two not-forprofit regulatory SROs—including with 

respect to FINRA’s overall financial 

management and the adequacy of the 

resources devoted to its regulatory 

programs. In addition, rules or fees 

adopted by FINRA are subject to review 

by the Commission’s Division of 

Trading and Markets. The Commission’s 

oversight of FINRA, in turn, is itself 

subject to Congressional oversight and 

evaluation by the United States 

Government Accountability Office 

(‘‘GAO’’) every three years. By statute, 

the GAO evaluates ten specific aspects 

of the Commission’s oversight of 

FINRA, including FINRA governance, 

executive compensation, and the use of 

funding to support FINRA’s mission, 

including the methods and sufficiency 

of funding, how FINRA invests funds 

pending use, and the impact of these 

aspects on FINRA’s regulatory 

enforcement. The GAO reports the 

results of its evaluation to Congress.96

Second, FINRA’s commitment to 

reasonable funding in support of its 

mission is further reinforced by the 

transparency it has committed to 

provide on an ongoing basis—pursuant 

to its Guiding Principles—regarding its 

financial performance. Each year, 

FINRA publishes an extensive Annual 

Financial Report regarding its 

operations, prepared in accordance with 

GAAP. In addition, FINRA publishes 

annual reports on its budget and its use 

of fine monies. FINRA’s Board also 

reviews and affirms its Financial 

Guiding Principles bi-annually and republishes these as well. FINRA also files 

with the IRS the Form 990 mandated for 

all not-for-profit organizations. 

Collectively, these reports provide 

extensive and comprehensive 

information regarding FINRA’s policies 

and operations with respect to its 

budgets, revenues, costs, financial 

reserves, use of fine monies, capital and 

strategic initiatives, and compensation 

of senior executives, among other 

information. FINRA maintains a 

dedicated web page that consolidates its 


ddrumheller on DSK120RN23PROD with NOTICES1
93726 Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 

97See FINRA Financial Reports and Policies, 

available at https://www.finra.org/about/annualreports. 98See generally Exhibit 3, Charts 7 through 10. 

99Based on figures drawn from FINRA’s public 

Annual Financial Reports, which include FINRA 

subsidiaries. 

100Based on FOCUS reports. 

101See https://www.sec.gov/fast-answers/ 

divisionsmarketregmrexchangesshtml. Additional 

registered national securities exchanges may 

contribute to more complex order lifecycles and 

trade reporting scenarios. 

annual reports in a readily accessible 

place.97

Third, as a not-for-profit organization, 

FINRA is committed to aligning its 

revenues with its mission-driven costs. 

If revenues exceed costs on a sustained 

basis, and FINRA’s reserves are 

sustained appropriately, FINRA will 

assess the merit of providing rebates. 

This approach helps ensure that the 

revenues from these proposed fee 

changes will not exceed FINRA’s 

reasonable regulatory costs and reserve 

needs on an ongoing basis. As discussed 

above, FINRA will continue to be 

guided by its historical approach to 

rebates if its revenue in future years 

exceeds its costs and reserves needs by 

a material amount. 

Together, these mechanisms help 

ensure the ongoing reasonableness of 

FINRA’s costs and the level of fees 

assessed to support those costs. The 

effectiveness of these mechanisms is 

demonstrated by FINRA’s experience 

over the last decade, during which, 

FINRA was able to undertake expanding 

regulatory responsibilities while 

limiting cumulative cost growth to a rate 

that was lower than inflation and cost 

growth experienced by members. 

The Proposed Fees Are Equitable and 

Not Unfairly Discriminatory 

As discussed throughout this filing, 

this proposed rule change is designed to 

increase the fees FINRA relies on to 

fund its regulatory mission in a manner 

that preserves an equitable and not 

unfairly discriminatory fee allocation 

among FINRA members and users of 

FINRA services. Notably, through this 

proposed rule change, FINRA is seeking 

to preserve the carefully calibrated mix 

of core regulatory fees and select usebased fees to fund its regulatory mission 

that the Commission previously 

approved as equitably allocated among 

its large and diverse membership. In 

addition, based on feedback from 

members of FINRA’s advisory 

committees and other industry 

consultations that emphasized the 

importance of advance notice and 

clarity of any fee increases for budget 

planning, implementation of the 

proposed rule change would take place 

over several years, with some fees going 

into effect in 2025, others implemented 

in 2026 or later, and some phased in 

over several years between 2025 and 

2029. 

The fees included in this proposed 

rule change were selected to address the 

impending funding deficit by raising 

fees in a way that maintains 

proportionality across members with 

minimal distributional impacts across 

firm sizes and business models. FINRA 

projects an aggregate dispersion level for 

the rate of increase realized across 

members to be 2.3% once the proposal 

is fully implemented.98 In other words, 

in choosing among options according to 

the principles described above, FINRA 

also sought to have minimal impact on 

the distribution of fee rate changes 

across members by firm size and 

business model, as measured by the 

standard deviation of the rate of the fee 

increases. Given this limited 

distributional impact, FINRA believes 

the proposed rule change will preserve 

the same equitable and not unfairly 

discriminatory fee allocation that has 

long served as the foundation for 

FINRA’s funding model and has been 

approved by the Commission. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Economic Impact Assessment 

FINRA has undertaken an economic 

impact assessment, as set forth below, to 

analyze the regulatory need for the 

proposed rule change, its potential 

economic impacts, including 

anticipated costs, benefits, and 

distributional and competitive effects, 

relative to the current baseline, and the 

alternatives FINRA considered in 

assessing how best to meet FINRA’s 

regulatory objectives. 

Regulatory Need 

Based on an analysis of its funding 

sources, anticipated costs, and 

expanding responsibilities, FINRA has 

determined that it will require 

additional revenues to continue to 

effectively meet its regulatory 

obligations. FINRA anticipates that the 

absence of stable funding at the levels 

proposed here may have material 

negative impacts on its regulatory 

program, weakening investor 

protections. Specifically, FINRA may be 

unable to maintain its current 

capabilities at their current standards or 

respond to a significant market event 

requiring unanticipated funding. In the 

absence of a fee increase, eventually 

FINRA may not be able to hire and 

retain staff with the appropriate 

expertise to conduct its regulatory 

activities (including examinations, 

market surveillance and investigations, 

enforcement, regulatory policy and 

rulemaking, qualification examinations 

and credentialing, and providing 

transparency for markets, members and 

registered persons), or make the 

necessary investments in the technology 

needed to support these activities. 

Economic Baseline 

The baseline for this proposed rule 

change includes FINRA’s historical 

costs and revenues, the current schedule 

of fees assessed by FINRA, and the 

direct and indirect allocation of those 

fees across members, associated 

persons, third parties, and investors. 

The baseline also encompasses the 

scope of activities conducted by FINRA 

to meet its mission, and FINRA’s 

current ability to address changing 

market activities and conditions through 

investment in staff, infrastructure, and 

technology. 

As a not-for-profit organization, 

FINRA targets break-even cash flows 

that allow it to appropriately fund its 

regulatory mission, and maintains a 

reasonable financial reserve necessary to 

meet unanticipated circumstances. 

Between 2013 and 2023, FINRA’s cost 

increase CAGR was 3.5%, or 41% over 

the entire period.99 Over the same 

period, members’ reported cost increase 

CAGR was 8.7%, or a total increase of 

129%.100

At the same time, capital markets 

have grown in size, complexity, and 

retail investor participation, in part, 

through an increase in the number of 

self-directed accounts and rapid 

technological changes. Partly in 

response to these changes, FINRA’s 

regulatory responsibilities have, and 

continue to, grow as described above. 

There have been substantial increases in 

equity and options trading volume 

(respectively, over 70% and 160% 

increases since 2013) and in corporate 

and agency bond trading volume (over 

230% increase since 2013). There has 

also been growth in the complexity of 

the securities markets (the number of 

registered national securities exchanges 

significantly increased since 2013, from 

14 to 24 101) and trading of new and 

evolving products, such as securitybased swaps and securities with crypto 

asset components, has increased. These 

changes have led to a more complex 


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102See Table 1.2.2 of the FINRA Industry 

Snapshot, available at https://www.finra.org/mediacenter/reports-studies/2024-industry-snapshot. As 

FINRA notes when it publishes industry snapshots, 

FINRA regularly updates historical data series due 

to data revisions by reporting firms. 

103See Table 2.2.3 of the FINRA Industry 

Snapshot. 

104FINRA By-laws define the size of a member 

firm by the number of associated registered 

representative as the following: small—150 or fewer 

registered representatives; mid-size—151 to 500 

registered representatives; and large—more than 

500 registered representatives. A subgroup of the 

small firms are known as micro firms, firms with 

10 or fewer registered representatives. 

105As discussed above, cost savings have been 

accomplished in recent years through expense 

reduction initiatives, including conducting a 

comprehensive efficiency review of FINRA’s core 

business lines; establishing a framework for 

improving measurement of FINRA’s key objectives 

and results; voluntary retirement/incentive 

programs in 2020 and 2024; and strategic 

reductions in FINRA’s corporate real estate 

footprint. 

106See supra note 22. 

107As with Chart 1, all of the charts discussed 

below are attached in Exhibit 3, available on 

FINRA’s website at http://www.finra.org. 

108The revenues and expenses presented in Chart 

2 in terms of Cash Flow Sources and Cash Flow 

Uses—both historical and projected—do not 

include subsidiaries other than FINRA Regulation 

and FINRA Dispute Resolution, which was merged 

into FINRA Regulation at the end of 2015. Cash 

Flow Sources includes Operating Revenues, 

Investment Returns and Fines. Cash Flow Uses 

includes Operating Expenses and Capital 

Initiatives. 

109See supra note 12. 

110As discussed above, FINRA has made 

reasonably conservative assumptions using a 

variety of information points, including historical 

data and anticipated trends. See supra note 15. This 

estimate is based on the following assumptions for 

FINRA and excludes the independent budgeting of 

all of FINRA’s active subsidiaries other than FINRA 

Regulation—specifically, FINRA CAT, LLC and the 

FINRA Investor Education Foundation: (1) wage 

inflation at an annual rate between 4% and 6%, 

consistent with the financial industry over the last 

five years; (2) technology expense growth: capital 

investments seeking long-term efficiency gains for 

both FINRA and the industry, rising cloud hosting 

costs driven by volume increases, maintaining 

technology labor competitiveness, and ongoing 

disaster recovery and cybersecurity requirements; 

and (3) rise in regulatory efforts and associated 

costs for FINRA’s regulatory programs. 

111Following the implementation of the proposed 

rule change, GIA, TAF, PA and Branch Office Fees, 

together, would represent approximately 72% of 

revenues, while use-based fees would represent 

approximately 28%. 

112FINRA conducted a study of a sample of 

members, which included approximately 25 retail 

investor focused broker-dealers and approximately 

15 institutional investor focused broker-dealers, to 

better understand practices of TAF pass through. 

The research found that the majority of the retail 

focused firms did pass through the TAF to their 

customers. FINRA does not know the full extent of 

this practice across all members. 

trading environment. This, in turn, has 

required enhancements to oversight by 

FINRA staff. In addition, as discussed 

above, FINRA has made substantial 

investments in its surveillance and 

examinations programs in response to 

new and amended SEC rules. 

Over the past several years, FINRA 

has observed changes in the number of 

registered persons and members. 

Between 2013 and 2023, the number of 

registered persons was essentially 

unchanged (627,468 and 628,392, 

respectively).102 In contrast, over the 

same period, the number of members 

decreased from 4,146 to 3,298, a 

decrease of approximately 20%.103

FINRA believes that the number of 

registered persons remained fairly 

constant because persons from exiting 

members migrated to other members, 

requiring FINRA regulatory resources to 

shift accordingly. FINRA staff’s 

quarterly reviews of departing firms find 

that on average about 75% of their 

associated persons remain registered 

after their firm exits the securities 

business, either by remaining with an 

affiliate firm or moving to a new firm. 

In the last quarter of 2023, the retention 

rate was closer to 90%. The difference 

in the decline in the number of 

members versus registered persons is 

also related to the fact that most exiting 

firms are small,104 such that their 

departure has relatively less impact on 

the total number of registered persons. 

Despite its increased responsibilities 

and changes in FINRA’s own oversight 

by the SEC, FINRA achieved relatively 

low expense growth through a variety of 

cost-saving mechanisms.105 Staffing 

generates the majority of FINRA’s 

expenses and was relatively flat until 

recent years, commensurate with 

increases in FINRA’s responsibilities. 

As discussed above, since 2013, 

FINRA’s total compensation costs rose 

by 31% on a cumulative basis as 

compared with a 50% increase for the 

average U.S. financial services 

employee.106 In aggregate, since 2013, 

FINRA’s expenses have grown less 

rapidly than those of members, with the 

ratio of member expenses to FINRA 

expenses gradually increasing over time. 

Chart 1, attached in Exhibit 3, presents 

these findings.107

Over the period between 2013 and 

2023, FINRA’s total regulatory and usebased fee CAGR was 3.9%. These 

revenues remained effectively flat from 

2013 through 2019 due to a limited 

number of fee increases. A previously 

implemented fee increase was phased in 

between 2022 to 2024 and has resulted 

in increased levels of operating revenue. 

However, FINRA projects that increases 

in revenue will either remain flat or 

slightly decrease after 2024. 

Chart 2 provides a view of actual 

revenues and expenses for 2013 to 2023 

and anticipated revenue and expenses 

for 2024 to 2029 if no changes to the fee 

structure are made.108 Chart 2 also 

includes historical and projected 

‘‘excess reserves.’’ FINRA maintains a 

reserve fund as part of its funding 

framework, and excess reserves are 

reserves in excess of the minimum 

determined by the FINRA Board of 

Governors as appropriate, which is one 

year of expenditures.109 FINRA has 

strategically relied on its reserves to 

help fund operating deficits in the past 

and will continue to strategically draw 

on its reserves where consistent with 

the Guiding Principles. Chart 2 

illustrates, however, that without a fee 

increase, FINRA is projected to exhaust 

excess reserves and deplete its reserve 

balance below minimum target levels in 

the coming years. 

Although FINRA’s revenues would 

remain near current levels without any 

changes in the fee structure, FINRA 

reasonably anticipates that its future 

expenses will continue to grow at a pace 

of 5.9% on average per year based on 

the compounding impact of annual 

wage inflation, technology costs, and 

future capital initiatives.110 In this 

scenario, revenues would increasingly 

fall behind anticipated costs. While 

FINRA’s reserves may continue to cover 

the shortfall in the near-term, the 

reserves will reach their minimum 

prudent level of one year of operating 

costs within three to four years based on 

current projections if no corrective 

action is taken. 

As described above, FINRA funds its 

regulatory and other related activities 

through a combination of regulatory fees 

and use-based fees. GIA, TAF, PA and 

Branch Office Fees, taken together, 

represent approximately 69% of 2023 

revenues, while use-based fees represent 

approximately 31% of 2023 revenues. 

The specific fees that would be 

increased under this proposal represent 

approximately 89% of 2023 revenues.111

All core regulatory and use-based fees 

mentioned above are assessed directly 

to members. FINRA understands that 

many members shift at least some of the 

fees to other parties. For instance, it is 

regular practice among clearing and 

trading firms to ‘‘pass-through’’ the TAF 

to the underlying firm executing the 

trade. Further, FINRA understands that 

the executing firms commonly pass the 

TAF directly on to their customers 

submitting orders. Typically, TAF fees 

are reflected on the confirmation 

statement received by customers.112

Similarly, FINRA understands that 

many firms regularly pass-through to 

registered persons assessments such as 

the PA, registration fees, and 

qualification examination fees. FINRA 

understands that there may be 


ddrumheller on DSK120RN23PROD with NOTICES1
93728 Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 

113The revenue in Charts 3–10 excludes 

Corporate Financing fees, which are generally 

passed through to issuers, and a portion of DRS fees 

that are paid directly by customers. See supra note 

31. The revenue in these charts also excludes MAP 

fees, which are incurred irregularly. See also supra 

note 8 and accompanying text. 

114See supra note 113. Here, business model 

represents the primary type of services provided by 

the member firm. 

115See, e.g., U. Bruggemann, A. Kaul, C. Leuz & 

I. Werner, The Twilight Zone: OTC Regulatory 

Regimes and Market Quality, 31(3) The Review of 

Financial Studies, 898–942 (2018); R. Cazier, J. 

Huang & F. Zhou, Regulatory Spillover Effects in 

OTC Markets, Review of Accounting Studies, 1–33 

(2023); Roger Silvers, The Valuation Impact of SEC 

Enforcement Actions on Nontarget Foreign Firms, 

54 (1) Journal of Accounting Research, 187–234 

(2016); Roger Silvers, Cross-Border Cooperation 

between Securities Regulators, 69 (2–3) Journal of 

Accounting and Economics, 101301 (2020); M. 

Lang, M. Maffett, J.D. Omartian & R. Silvers, 

Regulatory Cooperation and Foreign Portfolio 

Investment, 138 (1) Journal of Financial Economics 

138–158 (2020); H. Christensen, M. Maffett & L. 

Vollon, Securities Regulation, Household Equity 

Ownership, and Trust in the Stock Market, 24 (3) 

Review of Accounting Studies, 824–859 (2019); and 

D. Aghanya, V. Agarwal & S. Poshakwale. Market 

in Financial Instruments Directive (MiFID), Stock 

Price Informativeness and Liquidity, 113 Journal of 

Banking & Finance, 105730 (2020). 

differences in this practice across firms 

depending on each firms’ business 

model. Competitive markets for the 

provision of brokerage and related 

financial intermediation services, along 

with difficulty in allocating certain fees 

to specific transactions, can limit the 

extent to which these fees can be 

passed-through. 

Core regulatory fees are calibrated so 

that larger, more active and more 

geographically dispersed members are 

assessed higher fees, reflecting 

regulatory resource allocation. Likewise, 

the use-based fees that are part of core 

regulatory fees are designed to capture 

some of the costs associated with core 

regulatory activities in addition to the 

direct and indirect costs of the 

associated services. For example, FINRA 

believes it is appropriate that 

registration and qualification 

examination fees help defray the costs 

of regulating registered persons because 

members employing more persons 

require more regulatory effort on 

FINRA’s part. This approach is 

consistent with a structure where the 

fees paid increase with the size of the 

firm’s revenues (GIA) and the amount of 

trading activity it conducts (TAF). In 

addition, core regulatory fees tend to be 

correlated with member size and 

structure. As such, core regulatory fees 

are designed cohesively and 

comprehensively such that they should 

be evaluated in aggregate and not on a 

fee-by-fee or service-by-service basis. 

The fee structure is also designed, 

purposefully, to account for diversity in 

firm size. Compliance and regulatory 

oversight naturally represent a larger 

relative cost to small firms. Because 

FINRA wants to prevent regulatory costs 

from either creating a barrier to entry for 

small firms, or over-burdening existing 

small firms, the current fee structure 

includes a level of cross-subsidization 

by larger firms. 

FINRA believes that this practice 

supports two objectives. First, it is 

important that retail investors have 

access to diverse types of financial 

services intermediaries, including 

members of varying size. For example, 

some investors may prefer to engage 

registered persons associated with 

smaller firms. Second, the extent to 

which firms benefit from well-regulated 

markets is relative to firm size. Under 

well-regulated markets, investors are 

more willing to trust financial 

intermediaries because they are 

confident that they are treated fairly in 

their access to securities markets and 

products. Greater participation in the 

financial markets by investors allows 

firms to grow larger and become more 

diversified, leading to cost savings and 

reduced risk through economies of scale 

and scope. The concentration in both 

retail and institutional investor activity 

at larger firms suggests that larger firms 

reap substantial benefits from strong 

regulation and should therefore provide 

a substantial portion of the fees that 

support this regulation. At the same 

time, the impact of widespread 

misconduct at a larger firm may impair 

investor confidence more broadly than 

similar misconduct at a smaller firm. 

This lends further support to the 

practice of assessing higher fees on 

larger firms. 

Chart 3 presents the distribution in 

2024 of FINRA’s regulatory and usebased fee revenue and the proportion of 

FINRA’s examination time, along with 

the proportion of firms and registered 

persons, by firm-size category as defined 

in the FINRA By-Laws.113 Small firms, 

including micro firms, account for 89% 

of the firms in the industry, 10% of total 

registered persons, 57% of FINRA’s total 

firm examination time, and 12% of 

FINRA’s revenues. Large firms, 

conversely, represent less than 5% of 

firms, over 80% of registered persons, 

32% of FINRA’s firm examination effort, 

and approximately 67% of FINRA’s 

revenues. The remaining portions of 

firm examination time and revenues are 

attributable to mid-size firms. 

Chart 4 presents the same measures as 

in Chart 3 by the business model 

category. The categories of capital 

markets and retail firms account for 

80% of the firms in the industry, 72% 

of total registered persons, 55% of 

FINRA’s total examination time, and 

33% of FINRA’s regulatory and usebased fee revenues.114 The category of 

diversified firms, including most of the 

largest firms, accounts for 

approximately 5% of firms in the 

industry, almost 25% of total registered 

persons, over 27% of FINRA’s total 

examination time, and 44% of FINRA’s 

revenues. The remaining portions are 

attributable to the category of trading 

firms and the category of clearing firms. 

Economic Impact 

FINRA’s fee proposal is intended to 

ensure that FINRA can continue to meet 

its mission of promoting investor 

protection and market integrity in a 

manner that facilitates vibrant capital 

markets. This proposed rule change 

preserves FINRA’s ability to be a robust 

and effective SRO, protecting investors 

from manipulation, exploitation, and 

other harms. Adequate funding allows 

FINRA to develop regulatory 

approaches that are effective and 

efficient, and to revise its rules through, 

among other ways, its robust 

retrospective review process. Through 

appropriate funding, FINRA will be 

better situated to adapt to changing 

markets, market behaviors, and 

expanding responsibilities. A stable and 

reliable funding model also permits 

members to better anticipate and plan 

for FINRA’s fees. These benefits accrue 

to current and prospective investors, 

firms, issuers, and others participating 

in financial intermediation. 

FINRA notes that academic literature 

has provided evidence of the linkage 

between strong regulation in securities 

markets and improved outcomes, 

including more trading, lower 

transaction costs, and greater investor 

participation in the markets.115

Bruggemann, et al. [2018] study the 

impact of differences in state regulation 

on OTC stocks. They find that firms 

issuing in the OTC market subject to 

stricter regulation are more liquid and 

are subject to lower ‘‘crash risk.’’ Cazier, 

et al. [2023] examine the effect of the 

SEC’s initiative to prevent fraud in OTC 

markets by suspending inactive shell 

companies that could be targeted by 

market manipulators. The authors find 

that these suspensions are associated 

with fraud deterrence among other OTC 

firms operating within the same 

regulatory jurisdiction as the suspended 

firm. Silvers [2016] studies the impact 

of SEC enforcement actions against 

foreign cross-listed issuers. He shows 

evidence that other cross-listed issuers 

(not cited by the SEC) experienced 

positive returns, suggesting that 

increased regulatory attention increases 

valuation. Silvers [2020] and Lang et al. 


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Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 93729 

116The firm size categories are defined above, see 

supra note 104. 

117See supra note 113. 

118See supra note 113. 

119This 2029 industry revenue projection is based 

on historical FOCUS revenue growth of 8.5% 

(2013–2023). 

120See supra note 33 and accompanying text. 

121The average share price estimate is based on 

the number of shares and dollar trading volume 

from CBOE. See https://www.cboe.com/data_and_

access_solutions for details. 

122We exclude firms that are not assessed GIA in 

the base year from CAGR distribution analysis. 

Since GIA in the base year drives the denominator 

of the CAGR formula, firms that are not assessed 

GIA would have inflated CAGRs by construction. 

Therefore, we exclude these firms to ensure that the 

tails of our distribution reflect a more accurate 

measure of fee growth. 

[2020] further show that cross-border 

cooperation between securities 

regulators reduces the cost of liquidity 

provision and increases cross-border 

investment in the capital markets of 

participating countries. Finally, 

Christensen et al. [2019] and Aghanya et 

al. [2020] study the impact of the 

introduction of the European Union’s 

Market Abuse Directive and MiFID. 

These studies conclude that these 

initiatives, designed to enhance investor 

protections, have led to higher 

household ownership of equities, higher 

liquidity, and higher stock price 

informativeness. 

The proposed rule change would 

implement fee changes that would 

maintain the current distribution of total 

fees allocated across members by size 

and business model. Based on FINRA’s 

projections of fee increases from 2024 to 

2029, approximately 67% of the fee 

increases would be borne by large firms, 

22% by mid-size firms, 9% by small 

firms, 1% by micro firms and the 

remaining 1% by non-members.116

Chart 5 describes the proportion of 

regulatory and use-based fees 

anticipated to be collected under the 

proposed rule change across firm size 

categories during the period from 2024 

through 2029.117 In each year, 66%– 

68% of the fee is expected to be borne 

by large firms, 16%–17% by mid-size 

firms, 11%–12% by small firms, 

approximately 1% by micro firms, and 

3–4% by non-members. Therefore, the 

overall allocation of fees by firm size is 

expected to remain relatively 

unchanged with the implementation of 

the increase in fees. 

Chart 6 describes the proportion of 

regulatory and use-based fees 

anticipated to be collected across firm 

business models during the period from 

2024 through 2029.118 In each year, 

approximately 70% of the fees are 

expected to be borne by diversified and 

retail firms, with the remaining fees 

distributed relatively evenly across 

trading, capital markets, and clearing 

firms. As with FINRA’s analysis of the 

proposed fee increases by firm size, the 

chart demonstrates that the overall 

allocation by firm business models is 

expected to remain unchanged with the 

implementation of the increase in fees. 

Taken together, these charts indicate 

that the proposed fee increases are 

designed to allocate the growth in fees 

in an equitable manner, all else held 

equal, by maintaining a similar 

allocation of fees across firm sizes and 

business models, both overall and yearby-year. 

As discussed, while potentially 

material, FINRA fees represent a small 

dollar amount relative to industry 

activity. Since 2013, as a percentage of 

member revenue, FINRA’s total fees 

have ranged between 0.2% and 0.4%, 

with an average of 0.30%. Under the 

assumption that members’ revenues 

resume growth at a level commensurate 

with recent history,119 FINRA’s fees 

would be 0.31% percent by 2029.120

This share of member revenue is close 

to the historical average of 0.30%. 

The amount of the fee increase borne 

by members depends on the extent to 

which they shift the burden of these fees 

to their associated persons and 

customers. As discussed above, FINRA 

understands that of the fees addressed 

by this proposal, the fee most likely to 

be passed through to customers is TAF, 

which is directly tied to customer 

trading activities. Despite the passthrough, FINRA believes the proposed 

TAF increase would not significantly 

affect customer trading behavior as TAF 

represents a small proportion of the 

average value of customer transactions. 

In 2023, TAF per share traded was 0.031 

basis points (0.00031%) of the average 

price of the traded shares. When the 

new rates are fully implemented in 

2029, TAF per share traded would be 

approximately 0.058 basis points of the 

average price of traded shares.121

To better understand the impact of the 

proposed fee increases across members 

within each firm size category, FINRA 

analyzed the expected distribution of 

fee increases for all existing firms under 

the proposed fee structure, based on the 

expected rate of dispersion. Dispersion 

is a way to compare the anticipated 

growth rate in fees across a range of 

firms. Lower dispersion is associated 

with a higher degree of consistency in 

terms of the impact of the proposed fee 

increases and can be interpreted as more 

firms in a given group experiencing 

similar rates of growth. By seeking to 

limit dispersion, the proposal is 

effectively limiting the potential for 

inequitable treatment across members. 

This approach also reduces the potential 

for the proposed fee increase to create 

unintended impacts on the provision of 

financial services by members and the 

business models adopted by them. 

FINRA’s analysis examines the level 

of dispersion based on the CAGR of the 

expected fee increase. CAGR is 

measured in this analysis relative to 

FINRA’s projection of total fees in 

2024.122 CAGR provides a standard 

metric to compare the relative impact of 

the fee increases within and across 

subgroups. Because the number of 

registered persons, trading and other 

business activities, and resulting 

aggregate fee dollar amounts vary 

significantly across firms and firm sizes, 

benchmarking to CAGR permits FINRA 

to closely compare the magnitude of the 

distribution across firms. 

As discussed, implementation of the 

proposed rule change would take place 

over several years, with a minority of 

fees going into effect in 2025, most fees 

implemented in 2026 or later, and 

several fees phased in over several years 

between 2025 and 2029. Due to the 

variability in when fees are 

implemented, and whether they are 

implemented at one time or phased in, 

FINRA believes that considering 

dispersion by firm size category over the 

five-year period is more useful than on 

an annual basis. 

Charts 7 through 10 provide a view on 

the distribution of fee increases within 

each firm size category. These charts 

also report the median increase in 

FINRA fees that are the subject of this 

proposal over the full period from 2025 

through 2029 by firm size. Within the 

charts, each of the four central bars 

represents one standard deviation from 

the median, so that the two most central 

dark blue bars together would 

theoretically represent approximately 

67% of all firms evaluated (plus or 

minus one standard deviation) and 

approximately 95% of firms evaluated 

should be represented under the four 

most central dark blue and mid-blue 

bars (plus or minus two standard 

deviations) presented in the charts. 

While it is not feasible to eliminate 

the possibility that some members will 

experience a rate of fee growth that is 

outside of the two standard deviation 

range, FINRA sought to limit the 

number of firms falling into this 

category when structuring this proposal. 

These charts demonstrate that the 

proposal significantly limits the number 

of firms that fall beyond two standard 

deviations from the median increase. In 

particular, the proposal limits those 


ddrumheller on DSK120RN23PROD with NOTICES1
93730 Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 

123As discussed above, the select use-based fees 

include Corporate Financing Private Placement 

Review; Corporate Financing Public Offering 

Review; Advertising Regulation Review; DRS 

Arbitration; and Regulation T and Exchange Act 

Rule 15c3–3(n) Requests for Extension of Time. See 

supra note 24. 

124FINRA notes that because of the time lapse 

between proposal, adoption and implementation of 

fee increases, combined with changing business 

environments over time, it is difficult to reliably 

estimate the number of firms that might have exited 

historically because of previous fee increases. 

firms that would be expected to 

experience a materially higher fee 

increase than the median (as defined by 

two standard deviations). When 

considering all the fees in this proposal, 

FINRA estimates that fewer than 2.5% 

of members would experience a fee 

increase greater than two standard 

deviations from the median. When only 

core regulatory fees are considered (i.e., 

excluding select use-based fees that only 

impact the users of those programs or 

services) fewer than 1% of firms would 

experience a fee increase greater than 

two standard deviations from the 

median.123

Based on this analysis, FINRA 

concludes the following: 

• For micro firms, the median firm 

would anticipate an annual increase of 

3.4%, translating to a dollar increase of 

$625. Approximately three-quarters of 

these firms would experience an annual 

increase between 1.4% and 5.4% 

between 2025 and 2029. Holding 

revenues constant at 2024 levels, total 

regulatory and use-based fees would 

increase from 0.26% to 0.31% of 

FOCUS reported revenues on average. 

This group includes 1,538 firms and 

represents 46.5% of all FINRA 

members. 

• For other small firms, the median 

firm would anticipate an annual 

increase of 3.9%, translating to a dollar 

increase of approximately $4,135. 

Approximately 80% of these firms 

would experience an annual increase in 

fees between 1.3% and 6.4% between 

2025 and 2029. Holding revenues 

constant at 2024 levels, total regulatory 

and use-based fees would increase from 

0.23% to 0.29% of FOCUS reported 

revenues on average. This group 

includes 1,414 firms and represents 

42.8% of all FINRA members. 

• For mid-size firms, the median firm 

would anticipate a 5% annual increase, 

translating to a dollar increase of 

approximately $82,500. Approximately 

three-quarters of these firms would 

experience an annual increase between 

2.9% and 7.1% between 2025 and 2029. 

Holding firm revenues constant at 2024 

levels, total regulatory and use-based 

fees would increase from 0.26% to 

0.36% of FOCUS reported revenues on 

average. This group includes 212 firms 

and represents 6.4% of all FINRA 

members. 

• For large firms, the median firm 

would anticipate a 5.4% annual 

increase, translating to a dollar increase 

of approximately $415,000. 

Approximately three-quarters of these 

firms would experience an annual 

increase between 4.0% and 6.9% 

between 2025 and 2029. Holding 

revenues constant at 2024 levels, total 

regulatory and use-based fees would 

increase from 0.18% to 0.23% of 

FOCUS reported revenues on average. 

This group includes 141 firms and 

represents 4.3% of all FINRA members. 

FINRA notes that 1.7% of micro firms 

would experience a fee increase greater 

than two standard deviations above the 

median. Because the median increase is 

relatively low ($625), small dollar 

increases in fees can result in a large 

change in CAGR and its distribution. 

FINRA also notes that the 2.5% of 

small firms that would experience a fee 

increase greater than two standard 

deviations are mostly firms that would 

incur new or increased use-based fees 

for FINRA services that are not core 

regulatory activities. If only core 

regulatory fees are considered, only 

1.1% of small firms would experience a 

fee increase greater than two standard 

deviations from the median increase. 

The 2.4% of mid-size firms that 

would experience a fee increase greater 

than two standard deviations above the 

median are mostly firms that incur a 

significant increase in TAF. If TAF is 

excluded, only 1.4% of mid-size firms 

would experience a fee increase greater 

than two standard deviations from the 

median increase. As mentioned above, 

FINRA understands that the TAF is 

typically passed-through to customers. 

As part of its analysis, FINRA also 

considered the broad potential impacts 

on competition under this proposal. The 

analysis considers the impact across all 

FINRA members, across members based 

on size or business model, and between 

members and other financial services 

providers. 

FINRA does not anticipate that the 

proposal will materially impact 

competition among members. The 

proposal is designed to maintain the 

current funding model and the relative 

allocation of fees across its core 

regulatory fees and select use-based 

fees. In other words, each of the affected 

fees would increase commensurate with 

fees charged under the current 

framework; no individual fee would be 

raised such that it may create inordinate 

hardships for some firms and benefit 

others. Implementation of the proposed 

rule change would not require 

significant system or process changes by 

firms. 

Similarly, FINRA does not anticipate 

that the proposed rule change will 

materially impact competition across 

members of different sizes or business 

models. The analysis of distributions 

within firm size indicates that firms 

may anticipate some differences in fee 

increases based on the services they 

provide and the way they provide those 

services. Nevertheless, as designed, the 

proposal maintains the relative 

allocation of fees across firm size and 

business model, meaning the proposed 

rule change is designed to preserve a 

consistent rate of growth in fee increases 

across firm size and business model. As 

noted above, this approach is designed 

to limit the likelihood that any specific 

fee change may create hardships for 

some firms and benefit others. Further, 

this proposed rule change maintains the 

current approach for cross-subsidization 

of the cost of regulatory oversight of 

members of different sizes. 

FINRA can identify two potential 

impacts of this proposal on the 

competition between its members and 

other providers of financial services. 

Although these increases are calibrated 

to limit the impact on individual 

members, at the margin, some members 

may find these increases material to 

their business. Further, where members 

may have the ability to provide similar 

services, or a subset of services, under 

an alternative business model that does 

not require FINRA membership, 

increased FINRA costs may increase the 

likelihood that these firms withdraw 

from FINRA in favor of the alternative 

business model. Based on the 

information available to it today, FINRA 

does not have an accurate measure of 

the number of members that may choose 

to withdraw registration as a FINRA 

member as a result of this proposed rule 

change.124

The proposed rule change may have 

an additional impact on competition 

through funding FINRA’s regulatory 

activities. As discussed above, strong 

and effective surveillance and 

regulation of securities markets has been 

shown to increase investor confidence 

in the fairness of the market. This has 

been measured by an increase in retail 

participation in the securities markets, 

greater liquidity, and higher securities 

valuations. Given the presence of 

substitutes to broker-dealers for retail 

clients—e.g., investment advisory 

services, issuers selling directly to the 

public, or certain market-linked 

insurance products—it may be 

reasonable to expect that effective 

regulation by FINRA would continue to 


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Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 93731 

125See supra note 12. 

126 In the first quarter of 2020, FINRA saw an 

increase in alerts generated through its market 

surveillance of over 250% compared to the same 

quarter in 2019. 

127 15 U.S.C. 78s(b)(3)(A). 

128 17 CFR 240.19b–4(f)(2). 

129 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

be a positive externality to those 

competitors. That is, increased 

confidence by retail investors due to 

FINRA’s activities may increase 

business opportunities and lower 

transaction costs in the securities 

industry as a whole. This would benefit 

non-FINRA member competitors, 

especially in instances where investors 

do not recognize these competitors are 

not regulated by FINRA. 

Alternatives Considered 

In developing this proposal, FINRA 

considered several options. First, FINRA 

considered making all the fee changes 

effective in 2025. FINRA did not pursue 

this alternative because it believed that, 

where possible, members should be 

provided an extended time period to 

plan for the proposed fee increase. In 

light of uncertainty and volatility in the 

markets, FINRA believes that 

implementing the proposed fee increase 

at one time would impose a greater 

burden on members than phasing in the 

implementation of the fee increases, as 

proposed. 

FINRA also considered making all of 

the fee changes effective in 2026, but 

decided against that approach for many 

of the same reasons noted above. 

However, FINRA believes that deferring 

implementation of all fees in this 

proposed rule change is unnecessary 

and would hinder FINRA’s ability to 

support its regulatory mission. As 

discussed, the uncertainty in the 

markets, which creates challenges for 

members and investors, also impacts 

FINRA. For example, market volatility 

increases the risk that FINRA’s reserve 

portfolio will fall below the appropriate 

minimum.125 This limits FINRA’s 

flexibility in relying on its reserves to 

cover funding gaps and indicates the 

need for stable funding as soon as 

practicable. 

Further, FINRA notes that consistent 

investor protection is of vital 

importance, particularly in times of 

uncertainty, where FINRA has seen an 

increase in customer complaints and 

alerts from its surveillance programs.126

Financial limitations that constrain 

FINRA’s ability to carry out its mission 

would have material negative 

implications for investors and the 

financial markets. Taking these 

concerns into account, FINRA believes 

that the most prudent course of action 

is to start increasing some fees in 2025, 

but to stagger the implementation over 

multiple years. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 127 and paragraph (f)(2) of 

Rule 19b–4 thereunder.128 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2024–019 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–FINRA–2024–019. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of 

FINRA. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. 

All submissions should refer to file 

number SR–FINRA–2024–019 and 

should be submitted on or before 

December 18, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.129

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–27764 Filed 11–26–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101690; File No. SR– 

NASDAQ–2024–067] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Its 

Fees for Connectivity and Co-Location 

Services 

November 21, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

8, 2024, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


ddrumheller on DSK120RN23PROD with NOTICES1