The Financial Industry Regulatory Authority (Finra) is projecting a revenue shortfall this year, but indicated it will close the gap by tapping into reserves rather than raising member fees.
Finra said its long-term financial plan “assumes we will increase member fees only after evaluating other sources of funding, including drawing down on excess reserves, and that we will also rely on reserves from time to time as we increase capital and initiative spending to meet our regulatory responsibilities.’’
In its 2019 annual budget summary, Finra's projected operating revenue is $846.9 million, down from $850.1 million a year ago.
Operating expenses of $922.5 million represent an increase of 3.7 percent. This, Finra said, is due primarily to increases in compensation and technology-related expenses. Since 2015, operating expenses have steadily increased at an annual rate of about 1.6 percent.
Depending on how much it raises through fines and investment returns, Finra said its projected revenue shortfall could result in a draw on their reserves of $185.8 million.
The self-regulatory organization said revenue from regulatory fees—including fees that are primarily assessed according to the firms’ gross revenue and trading volume, and the firms’ total number of registered representatives—are projected to increase. But, it says revenue from user fees, which comprise about one-third of operating revenue, are expected to decrease, primarily driven partly by lower registration fee revenues and declining testing exam volume.
Finra's capital expense budget is expected to be $97.3 million, $21 million more than last year. Finra also has set aside $1.5 million for relocation costs and related renovations to new and existing office space.