Leading Financial Services Organizations Respond to FINRA's Estimates
The review was conducted by
FINRA released its cost estimate on
BCG's review finds:
- FINRA's estimate omits the cost of
SECoversight ( $90-$100 million) and the cost of enforcement ( $60-$70 million), both of which are required by the legislation;
- FINRA's estimate of
$12-$15 millionin setup costs does not include staff costs incurred during the 12-month setup period, specifically the cost of examiners and support staff. FINRA only includes these expenses as part of its ongoing investment once the SRO is up and running. This omission accounts for $180-$230 millionof the difference between the BCG and FINRA estimates;
- FINRA's estimate of the ongoing annual cost of examining 14,500 IA firms once every four years, assumes that FINRA's IA examiners would be able to nearly double the productivity rate of SEC IA examiners, by performing 5 or more examinations per examiner per year. This compares to SEC IA examiner productivity of 3.0, and FINRA broker-dealer examiner productivity of 2.8. This productivity assumption accounts for
$150-$170 millionof the difference between the BCG and FINRA estimates; and
- FINRA's estimate does not include overhead costs in its estimate of
$150-$155 millionof ongoing annual investment. Overhead costs account for $135-$140 millionof the difference between the BCG and FINRA estimates.
"We believe that the review of FINRA's cost estimates confirms the independent economic analysis conducted by BCG last year. We think it would be a mistake to add an unnecessary layer of regulation and cost on small businesses that deliver sound advice to investors," the group sponsoring the BCG review said. "We continue to believe that oversight of investment advisers should stay with the
A side by side comparison of the cost estimates can be found here.
SOURCE Certified Financial Planner Board of
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