Small-firm seat on regulator's board is open; will be filled at annual meeting in August.
At least five potential candidates are working to collect enough signatures from their colleagues to get on the ballot for the open small-firm seat on the Finra board.
By Monday, candidates must file a minimum of 117 signature petitions, which equates to 3% of all small firms. Small broker-dealers are those with no more than 150 registered reps.
After the ballots go out, final votes will be tallied at the Financial Industry Regulatory Authority Inc.'s annual meeting Aug. 12.
In recent years, the jockeying among small-firm candidates has involved personal attacks, something Finra chief Richard G. Ketchum sought to discourage in an e-mail to member firms last month.
“I have heard a number of complaints from members about the level of animosity and personal attacks that surround some election-related communications,” Mr. Ketchum wrote.
While Finra can't limit what candidates say, “we hope that all candidates will focus their communications on the relevant issues and help create a more positive election environment,” he wrote.
“I think this has been the cleanest campaign in at least five years,” said David Sobel, general counsel at Abel/Noser Corp. and one of the board hopefuls. “People are attacking the issues and not each other.”
Finra itself, however, is fair game.
Small-firm candidates say Finra's rules and other regulations are putting smaller broker-dealers out of business.
“We're losing two and a half firms a week [from] overregulation, never-ending audits, and rising fees and expenses,” said Stephen Kohn, founder of Stephen A. Kohn & Associates Ltd., who is seeking a spot on the Finra ballot.
Others circulating petitions include incumbent Jed Bandes, president of Mutual Trust Co. of America Securities Inc. in Clearwater, Fla., Robert Keenan, chief executive of St. Bernard Financial Services Inc. in Russellville, Ark., and Howard Feigenbaum, owner of Sharemaster in Hemet, Calif.
“The biggest thing I think we need is an instruction manual for small firms,” Mr. Keenan said. “I just think Finra can do a whole lot better in helping us comply.”
“I suggest in my platform that there should be an independent economic analysis” for new rules, Mr. Feigenbaum said.
Mr. Bandes also supports cost-benefit analyses on regulations and an overhaul of Finra advertising rules, which he argues make it difficult for small firms to advertise their wares, like tax-free bond offerings.
“Large firms can advertise on the Super Bowl,” he said. “We can't, so we do more product advertising.”
Mr. Sobel said Finra needs to “change its focus from enforcement to compliance. A perfect example is [the order audit trail system] where you get a $5,000 fine as soon as someone screws up.”
Firms report Nasdaq and OTC equity trades via OATS, which is a complicated program to use, Mr. Sobel said.
A big issue for small firms is the requirement in the Dodd-Frank law that broker-dealers use an auditor registered with the Public Company Accounting Oversight Board to certify their annual financial statements.
PCAOB-registered auditors are too expensive and unnecessary, the candidates contend.
“What we have to do is convince the [Securities and Exchange Commission] and lawmakers that this is hurting small business,” Mr. Bandes said.
Mr. Feigenbaum said the cost of hiring an accountant motivated him to run for the board in the first place.
“It was definitely a sticker shock,” he said.
Finra's board has 22 members and a public majority. Three seats are reserved for small firms, three for large firms that have more than 500 registered reps, and one for a midsize broker-dealer with 151 to 499 reps.
