WASHINGTON — The Securities and Exchange Commission on Friday approved rule changes that allow the Financial Industry Regulatory Authority to collect fees from its broker-dealer members to help fund the Governmental Accounting Standards Board.
The so-called accounting support fee will be based on members’ municipal securities trading volume.
Each calendar quarter, FINRA will assess members a portion of one-quarter of GASB’s annual budgeted expenses, based on the par value of the muni transactions they report to the Municipal Securities Rulemaking Board for that quarter. Any member whose quarterly assessment is less than $25 will not be charged any fee for that quarter.
The first fees collected will be based on the trading activity of firms for the first quarter of this year, according to the SEC’s order approving the rule changes.
GASB had estimated it would need $3.9 million of accounting support fees in the second half of 2011, according to the 2011 budget on its website.
The SEC did not address whether FINRA member brokers-dealers could pass the fee on to customers or issuers.
“How FINRA members recoup their expenditures is not the subject of Section 19(g) of the Securities Act or FINRA’s proposed rule change,” the SEC said in its order.
FINRA filed the rule changes with the SEC in December.
The SEC said, “The proposed rule change provides for the equitable allocation of reasonable dues, fees, and other charges among FINRA members,” and “the fee will be proportionately distributed among FINRA members.” The GASB fee had divided the municipal bond industry.
Many issuers had called on the SEC to keep FINRA members from passing the fee onto them, but dealer groups did not want the fees passed onto customers and said their members should be allowed to pass the fees onto those that benefit from GASB’s rules, including issuers, banks, financial advisors, rating agencies, insurance companies, mutual funds, legislative and government staff, and taxpayer organizations.
GASB is an arm of the Financial Accounting Foundation and establishes accounting and financial reporting standards for state and local governments. Its standards are not binding, but governments must comply with them to receive clean audit opinions on their annual financial statements.
Historically, GASB relied on voluntary donations from state and local governments, as well as revenue from sales of its publications, but contributions plunged after the 2008 financial crisis.
The Dodd-Frank Act in 2010 gave the SEC authority to require that FINRA establish fees to fund the GASB’s annual budget. Last May, the SEC ordered FINRA to create the fee and related rules and procedures.
