Finra considers exemption process on CMA fee

The Financial Industry Regulatory Authority Inc. will consider an exemption process for its application fee for continuing membership. The CMA fee, as it is known, was one of the most controversial items among a package of member fee hikes that Finra began implementing last month. Members must file a CMA to approve material changes in their businesses, such as expansions, acquisitions and changes in ownership and management. Last month, Finra began charging from $5,000 to $100,000 to process a CMA, depending on the size of the firm and type of change. But this month, Finra told the Securities and Exchange Commission in a letter that it will “consider adopting an exemption process” if a CMA doesn't involve substantial changes or controversy, or require significant staff review. “A fee exemption process for CMAs is currently under consideration, and we expect to have a proposal for [the Finra board of governors] in the near term,” Finra spokeswoman Nancy Condon wrote in an e-mail. David Sobel, general counsel of Abel/Noser Corp. and a member of Finra's small-firm advisory board, is worried that the income brought in by CMA fees gives Finra a financial incentive to require the formal application even in cases that might not involve material changes.

JUDGMENT CALL

An exemption process could help, he said, but Finra staff would still need to make a judgment call about when to apply it. “It still comes down to who's making that decision,” Mr. Sobel said. “If it's [Finra staff], they're going to collect their money” by requiring a CMA, he said. djamieson@investmentnews.com Twitter: @dvjamieson