SIFMA draws flak for Florida fee hikes

IRVINE, Calif. — Some brokerage firms are miffed about higher registration fees that Florida implemented this month, and blame the Securities Industry and Financial Markets Association for not doing enough to stop the increases.
Sources said SIFMA promised to work with the Florida Securities Dealers Association Inc. of Tallahassee to try to stop the increases in registration and renewal fees charged to registered representatives and investment adviser reps.
But on its own, the New York- and Washington-based trade association agreed to support a fee increase to $50, from $30, per rep for both broker-dealer and registered investment adviser registration. Florida originally had proposed raising the fees to $70.
With SIFMA on board, the FSDA had no choice but to go along, sources say.
O’Bannon Cook, executive director of the FSDA, downplayed any conflict. “After working with [Florida’s] Office of Financial Regulation, we and SIFMA decided to support [the increases],” he said.
The FSDA was “stabbed in the back” by SIFMA, said Richard Goble, president of the Financial Industry Association of Longwood, Fla., which represents small firms, and founder of North American Clearing Inc., also in Longwood.
“We sat down with [Florida regulators], looked at their revenue goals, and they came to accept a [lower] fee” than had originally been proposed, said Travis Larson, SIFMA spokesman.
The new fee schedule is in line with other states, he said.
“We compromised a bit, and [the industry] came on board at the end,” said Rick White, director of the division of securities, part of Florida’s Office of Financial Regulation in Tallahassee.
The hard feelings are now “water under the bridge,” said Michael Underwood, an attorney in the Tallahassee office of Cleveland-based law firm Squire Sanders & Dempsey LLP.
But firms everywhere will still feel the impact.
“Over 90% of broker-dealers [nationwide] are licensed to do business in Florida, because it’s such an important market,” Mr. Underwood said.
The Florida fee flap once again raised concerns among some smaller firms that SIFMA represents primarily larger firms that are better able to bear new regulatory burdens.
The rift between small-firm interests and larger dealers has been heightened during the debate over the proposed merger between the regulatory units of the New York Stock Exchange and Washington-based NASD.
Assuming that it wins approval, the new self-regulatory organization is to be called the Financial Industry Regulatory Authority.
SIFMA supported the merger proposal. Many smaller firms opposed it because it would take away their ability to vote for the majority of board seats.
Critics of the higher Florida fees say SIFMA could have pushed harder to avoid the increase.
“The [Florida securities] department budget was nowhere near what the [fee] increase was,” said an industry source at a regional firm who was familiar with the fee negotiations and who asked not to be identified.
“Our industry is a very easy target” for regulators to raise revenue, said Jed Bandes, president of Mutual Trust Company of America Securities Inc. in Clearwater, Fla.
Mr. White said the state needs the additional $6 million the higher fees will raise. He said his office will likely use the new funds for additional staffing and technology costs.
Florida hasn’t raised agent fees since 1996, Mr. White said, during which time the number of agents licensed in the state has grown by almost 100,000, to 290,000.
Among the six states with the most registered broker and adviser agents, only California’s $25 fee was cheaper than the $30 fee in Florida, according to an analysis by Florida officials.
Sore point
Registration and other assorted fees are a sore point for firms and advisers. “Fees have been going up over the years,” said Linda Wessels, founder of Financial Industry Advisors Group in Vista, Calif. “You never see them go down.”
Many reps and advisers are registered in the majority of states, and the fees they pay can amount to several thousand dollars combined, she said.
As part of the change in Florida law, a new trust-funding system was put in place for the securities division so that most registration fees will be set aside to fund regulation.
Most industry observers supported that change, which is unusual among the states.
One drawback of trust funding is that regulators “might develop a sense of ownership [over those fees],” Mr. Underwood said.
“On the other hand, the industry didn’t think it was getting its money’s worth” when fees were going into Florida’s general-revenue fund, he said.
Separately, changes in Florida’s onerous insurance agency licensing rules also took effect this month. The changes, which eliminated the need to license brokerage branch offices as insurance agencies and to have a resident agent in charge, were supported by the industry.
Branches will now pay a one-time insurance registration fee. The agency licensing law “gave everyone fits,” Mr. Underwood said.