B-Ds suffer SIPC ‘sticker shock’ as fees come due
Higher assessments by the Securities Investor Protection Corp. are shocking some brokerage firms.
Higher assessments by the Securities Investor Protection Corp. are shocking some brokerage firms.
The new SIPC fees covering the second quarter were due on Friday, but firms have a 15-day grace period, SIPC spokesman Scott Stapf said in a statement.
For the last 14 years, firms have been paying a flat $150 per year, but the new annual assessments are running into the thousands of dollars for small firms.
“A lot smaller firms are really resentful,” said Howard Spindel, founder of Integrated Management Solutions in New York, a consultant to broker-dealer firms.
“They’re paying for Bernie Madoff,” he said. “It’s sticker shock for some of them.”
Early this month, the SIPC said it had committed $231 million to pay off 543 approved claims from Madoff clients. The SIPC pays up to $500,000 per customer in cases of fraud.
The Washington-based SIPC is charged with keeping at least $1 billion in reserves to pay off customers of failed broker-dealers.
[More: SIPC raises assessment fees on brokerage firms]
Don Bizub, chief executive officer at Western International Securities Inc., a Pasadena, Calif., firm with about 300 independent-contractor reps and $25 million in revenue, said his assessment will go to about $44,000 a year.
“I was pretty amazed,” he said. “We hadn’t budgeted for that.”
Jed Bandes, president of Mutual Trust Company of America Securities Inc. in Clearwater, Fla., which has about 30 brokers bringing in $2 million to $3 million in revenue, estimated his fee will come out to about $4,500 a year.
“I’m totally appalled,” he said.
The increase in assessments is necessary to ensure that the reserve fund “is sufficient … thereby increasing public confidence in the securities markets,” Mr. Stapf said in the statement.
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