Voicing concerns of its membership over the “timing, context andsize” of FINRA’s proposed fee increases for the broker-dealerindustry, the Financial Services Institute (FSI) has submitted acomment letter to the SEC opposing the increases.

FSI President and CEO Dale Brown said in an interviewMonday that “everybody in the country, the industry and all FSImembers are facing continued challenges” due to the slow economy,but that the timing of the raised fees just adds to the “humongous”cost of compliance for its independent broker-dealer members,especially its smaller firms, and individual financialadvisors.

Exacerbating the rising costs of doing business, Brown said, isthe “aggravated uncertainty” of the slow pace of Dodd-Frankimplementation. “It has a cumulative effect on everybody,” Brownsaid, but “disproportionately on smaller firms,” which FINRAdefines as those BDs with fewer than 150 representatives.

FSI said that 24 of its BD member firms qualify as small firms.FSI has a little over 100 member firms.

In addition to sending its comment letter to the SEC, FSI hasalso urged its member firms to express their opposition to theproposed fees, which includes higher fees for advertising and salesliterature, membership application fees, CRD filing fees and branchoffice registrations.

The comment letter and FSI’s ‘Call to Action” for members tocomment is part of the group’s “constructive engagement” withregulators, Brown said, “taking advantage of opportunities tocomment” on a host of regulators’ proposed rules. FINRAfirst proposed the higher fees in April, with FINRAChairman and CEO Richard Ketchum arguing that the increases werenecessary to recoup a “significant loss” in revenue the BDregulator suffered in fiscal 2011.

Moreover, Brown said, the impact of the higher FINRA fees goesbeyond raising the cost of doing business for broker-dealers andreps, and “it’s safe to assume that they’d need to pass on some ofthose costs to their clients. This is not the environment nor theright time for this to happen.” Further, “if the complianceenvironment continues to get more costly, complex and uncertain,”warned Brown, “at some point that means fewer choices forconsumers.”

In its comment letter, FSI wrote that "IBD firms operate on veryslim profit margins," noting that its 2010 Broker-Dealer FinancialPerformance Study found that from 2004 to 2009, the "average medianprofit margin for IBD firms was 1.7 percent." The increased FINRAfees would place even more pressure on IBDs, the comment letterstates, and would "come on top of astronomical increases in SPICassessents, SEC fees, fidelity bond premiums" and E&O insurancepremiums.

FSI has been a vocal supporter of FINRA as the preferredself-regulatory organization for RIAs under Dodd-Frank; Brown laidout FSI's arguments in a blog post for AdvisorOne in May.In the interview Monday, however, Brown said that its support ofFINRA as the SRO for RIAs “was not a blank check endorsement,” andthat while FINRA has a “long, solid track-record as a regulator, itmust “ continue to improve and reform as a regulator.” FINRA, hesaid, must not only “become more effective,” but also be “sensitiveto the cost of their regulatory responsibility to member firms andadvisors and the unintended consequences” to investors.