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Regulation and Compliance > Federal Regulation > FINRA

FINRA Earnings Rise as Fines Soar

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After reporting a sizeable loss in the prior year, the Financial Industry Regulatory Authority says it had a better 2016.

The nonprofit regulatory group reported net income of $57.7 million, according to its recent financial report, versus a loss of $39.5 million in 2015. It pointed to two factors for the improved results: fines and portfolio returns.

“An increase in fines revenue more than offset the decrease in operating revenues for the year, while portfolio returns, including interest and dividend income, increased $70.9 million year over year,” the group explained in its report.

Despite a roughly 10% drop in the number of monetary sanctions to 624 in 2016, the overall level of fines soared 85% to $173.8 million. The group also ordered firms and advisors to pay $27.9 million in restitution to investors last year.

Still, FINRA’s operating revenues fell 6% in 2016 to $844.6 million.

This decline, said President and CEO Robert W. Cook in the group’s report, was caused by “changes to the scope of regulatory functions provided under regulatory services agreements, lower corporate financing fees due to a decline in the number of filings for initial and secondary public offerings, and a decline in continuing education fees following the transition to a lower-fee online delivery format — which was designed to reduce costs and increase convenience for our members.”

As for 2017, Cook adds that FINRA expects “challenges to continue this year, with a projected decline [in operating revenue] of 1%.”

Exec Pay

Salaries for FINRA’s top executives remain at $1 million and up.

Cook, for instance, will collect a base salary of $1 million this year. He began work at the regulator in 2016 and declined incentive compensation for last year that would have been paid in early 2017.

Todd Diganci, FINRA’s chief financial and chief administrative officer, has a base salary of $600,000 and received incentive compensation tied to his 2016 performance of $695,000 for a 2017 total of close to $1.3 million. His total compensation in 2016 was nearly $1.5 million.

For the top 10 managers (including Cook and Diganci), expected compensation for 2017 ranges from $728,000 to $1.295 million.

In 2016, the executive with the highest compensation was Thomas Gira, head of market regulation and transparency services. He received nearly $2.7 million, including close to $1.7 million tied to his supplemental defined benefit retirement plan that covered 24-plus years of employment.

FINRA has 3,500 employees. Some 1,400 employees work on regulatory operations for the organization nationwide.

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