Hagerty Raises Concerns on FINRA’s Increased Member Firm Fees

WASHINGTON - Today, United States Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, sent a letter to the Financial Industry Regulatory Authority (FINRA) expressing concern about FINRA's decision to increase member firm fees and the need to ensure that the self-regulatory agency remains as transparent and accountable as the markets it oversees.

"We write to express our concerns regarding the Financial Industry Regulatory Authority's (FINRA) decision to increase member firm fees by $450 million, or about five percent on a compounded annual basis, through 2029 (the "Fee Increase"), which was approved by the Securities and Exchange Commission (SEC) in January 2025," Hagerty wrote. "The Fee Increase comes just three years after FINRA increased fees by $225 million starting in 2022."

"Importantly, we note that the Fee Increase was premised in part on FINRA's expectation that it would need to implement and enforce certain SEC rule proposals promulgated under former Chairman Gary Gensler that were appropriately - and predictably - withdrawn by the SEC under Chairman Atkins' leadership in June 2025, including the Use of Predictive Data Analytics, Regulation Best Execution, and the Order Competition Rule," Hagerty continued.

A copy of the letter can be found here and below.

Dear Mr. Cook:

We write to express our concerns regarding the Financial Industry Regulatory Authority's (FINRA) decision to increase member firm fees by $450 million, or about five percent on a compounded annual basis, through 2029 (the "Fee Increase"), which was approved by the Securities and Exchange Commission (SEC) in January 2025. The Fee Increase comes just three years after FINRA increased fees by $225 million starting in 2022. As described below, we question FINRA's strategy to raise member fees rather than pursue other options to address its large operating expenses, much of which (e.g., employee compensation) are likely avoidable. FINRA's desire to consistently increase member fees by hundreds of millions of dollars, among other actions, is a concerning sign that its operations and approach to regulation have expanded beyond its limited statutory authority to protect investors from fraud and advance confidence in the securities market.

We note that these fee increases come despite the brokerage industry shrinking. Notwithstanding FINRA's argument that the Fee Increase is necessary to address "the continued growth in the breadth and complexity of FINRA's regulatory obligations," the brokerage industry has significantly contracted over the last 20 years and the number of FINRA registered broker-dealers has declined each year from 2006 through 2023, from 5,026 to 3,298 (-34%) over that period. Moreover, the number of FINRA registered representatives has also declined over the last decade to 628,392 in 2023, off almost 2% from a peak of 639,442 in 2015 (and down over 4% since 2006). Meanwhile, the number of SEC registered investment advisers - which are not regulated by FINRA - reached a record high 15,396 in 2023, a 47% increase since 2006.

Second, another member fee increase is not necessary to address FINRA's burgeoning operating expenses, most of which are driven by outsized and increasing compensation costs. According to FINRA, "ninety percent of FINRA's operating expenses are driven by compensation and technology costs." In 2023, the average compensation and benefits per employee rose by 4.7% to $233,500, up from $223,000 in 2022 - this compares to around $160,000 in basic earnings on average for an employee in the financial industry according to the U.S. Bureau of Labor Statistics. The increase in compensation at FINRA has coincided with growth in FINRA's workforce from 3,900 to 4,200 employees during the same period. The total compensation and benefits expenses for FINRA increased by 12.8%, reaching $981 million in 2023 compared to $870 million in 2022, which makes up an outsized 62% of expenses according to FINRA's most recent annual report. Moreover, FINRA's CEO has made between $3.46 million and $3.84 million in compensation and benefits each of the last three years, and FINRA's eight highest paid employees (including the CEO) make over $1.75 million on average.

Third, in addition to reviewing its compensation and benefits programs, we believe FINRA can do (and should have done) more to proactively address its operating expenses before proposing additional member fee increases. For example, FINRA should address the costs associated with legally suspect programs which have included, among other things, a Diversity Leadership Council, annual Diversity Leadership Summit, and multiple affinity groups. FINRA should also critically assess the costs associated with a number of other programs including, but not limited to, its lobbying expenditures ($850,000 to 21 lobbyists in 2025); operating leases; "Research and Development" program; "Creatathon" events; employee Award of Distinction program; professional development partnerships with Georgetown University and the Wharton School at the University of Pennsylvania for FINRA employees; internal mentoring programs such as eDriven, reverse mentoring and Inspired to Lead; and video production costs. It does not appear that FINRA addressed additional cost-cutting measures in its analysis of available alternatives.

Importantly, we note that the Fee Increase was premised in part on FINRA's expectation that it would need to implement and enforce certain SEC rule proposals promulgated under former Chairman Gary Gensler that were appropriately - and predictably - withdrawn by the SEC under Chairman Atkins' leadership in June 2025, including the Use of Predictive Data Analytics, Regulation Best Execution, and the Order Competition Rule.

Please respond to the following questions no later than May 1, 2026:

1. To help manage costs, FINRA recently engaged "a third party to conduct operational reviews across core business and support functions to assess our effectiveness and efficiency and identify opportunities for improvement and potential cost savings." Please describe (i) the total expenses incurred by FINRA in connection with this third party engagement; (ii) all recommendations to reduce costs proposed by the third party and the associated dollar value of such savings; and (iii) which recommendations FINRA has fully implemented as of the date of this letter. Please also produce any reports prepared by the third party.

1. Please provide a description of all real estate owned or leased by FINRA including, but not limited to, the total cost of each location, how many staff are assigned to each location, and the number of days each employee reports to each location on average each week in each of 2023, 2024, and 2025 year-to-date.

1. Please detail any technical efficiencies that FINRA has employed (for example, artificial intelligence) that can help reduce costs, including compensation costs.

1. Please detail the impact on FINRA's budget of its current deferred compensation and retirement benefits programs (including any early retirement packages), the growth of the benefits on average, per employee over each of the past 5 years, and to the extent payments are still being made, any former retirement benefits programs.

1. Please detail the current composition of FINRA's front office (including, but not limited to, the office of the CEO and his direct reports) and provide compensation information for each person and a rationale for the role that person performs.

Sincerely,

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