• John Parmigiani

A Message to Member Firms 2017 Review

Dear Small Firm Executive Representatives:

The Small Firm Advisory Board, recently renamed the Small Firm Advisory Committee (SFAC), had a very productive year in 2017. As the outgoing chair, I wanted to take a moment to brief you on some of the issues we confronted, evaluated and commented on over the last year.

The Small Firm Advisory Committee meets five times each year to review FINRA rule proposals and provide valuable feedback to FINRA staff on the impact the draft rule proposals would have on small firms if enacted. During our meetings, we interact with FINRA senior staff from departments including Member Relations and Education, Market Regulation, Office of General Counsel, the Office of the Chief Economist, and others. FINRA's CEO, Robert Cook, regularly attends our meetings.

Members of the SFAC spend considerable time preparing for and expressing the views of small firms in these meetings, in our collective effort to ward off unnecessary or unduly burdensome regulation for small firms. Where regulation makes sense, the SFAC is focused on promoting efficient and meaningful regulation that takes into consideration the composition and unique challenges of a small firm. We also address issues raised by small firms across the country, in an effort to respond to the concerns you bring to us directly for discussion and response.

Rule proposals we worked on in 2017 include several that, if passed, would directly impact small firms. For instance, we have advocated fiercely on behalf of small firms against proposed changes to BrokerCheck while simultaneously arguing for enhancements that would clarify issues surrounding disclosures and ultimately benefit sound, small firms and their reps; we provided feedback on proposed new licensing requirements on a small firm's registered representatives and principals, as well as proposed fee increases; we also examined multiple proposed rules focused on high-risk firms and brokers, and effectively advocated on behalf of small firm interests – we want the bad guys out of this business, but we always have our eye on the unintended consequences of rules that capture good firms along with bad; we worked hard on the Outside Business Activities and Private Securities Transactions draft rule rewrite; and we submitted a report requesting financial reporting system enhancements that would greatly assist small firms in their monthly reporting, among numerous other issues.

In each instance, we applied our knowledge as industry professionals, our background as small business owners and operators, our relationships and networks with other small firms, and our anecdotal experiences to impart critical and constructive views to FINRA senior staff.

There are many possible outcomes from our input at the SFAC meetings. Sometimes we can present such convincing data and feedback on a proposed rule that FINRA decides to withdraw the draft proposal; we had a number of these scenarios in 2017. When appropriate, the draft rule is revised to reflect small firm nuances identified by the SFAC members. We also often request that FINRA publish rule proposals in the form of a Regulatory Notice, prior to filing with the SEC. This additional comment period allows for greater industry input. Member firm responses to requests for comment issued in Regulatory Notices make a difference. Over the past year, industry comments to the rule proposals have resulted in smarter regulation by triggering amendments to filing requirements, language and scope in a manner that benefits small firms, regulators and investors alike. We strongly encourage you to take advantage of the comment process, either by submitting your written comments directly, or by contacting any SFAC members for assistance.

Although the scope and content of our meetings are confidential, our input is shared with the FINRA Board of Governors through written commentary, and through the voice of the three Small Firm Governors, who are invited to attend our SFAC meetings.

As individuals, members of the SFAC have continued to reach out to the SEC, members of Congress, state regulators and state legislators to inform and educate these influential leaders about the impact of regulation and legislation on small firms. Issues tackled by SFAC members through their individual efforts in 2017 included the PCAOB audit requirement, BrokerCheck, the fiduciary standard, various industry-related tax reform bill provisions, and other issues related to broker-dealers and investment advisers.

In past national elections for important positions such as the Small Firm Seat on the FINRA Board of Governors (3 seats, all elected), the Small Firm Seat on the National Adjudicatory Council (the appellate body for FINRA-initiated enforcement actions – 2 seats, both elected), and the Small Firm Advisory Committee (10 seats, 5 elected and 5 appointed by FINRA), fewer than 35% of all small firm executive representatives cast a ballot. I cannot emphasize enough the importance of who fills these seats for you – and all of us – and of your engaging in these elections by casting your votes. I encourage you to participate by running for positions that interest you and by voting for qualified candidates capable of representing your interests.

I hope that this high-level summary of our activities helps you understand the role the SFAC fulfills in the rulemaking process. I also hope it provides a glimpse into the work being done by a dedicated team of small firm representatives who, each and every meeting, are fighting for you and for all small firms across the country.

I welcome Wendy Lanton as your 2018 SFAC chair, and invite you to contact any of us directly through links found on the Small Firm Advisory Committee web page of the FINRA website.

Best regards,

Paige W. Pierce

2017 Chair, Small Firm Advisory Board

2018 Small Firm Advisory Committee Roster

Cathy Cucharale

M. Griffith Investment Services

New Hartford, NY

Allan Goldstein

Trade Informatics

Purchase, NY

Robert Hamman

First Asset Financial, Inc.

Salina, KS

Wendy Lanton

Lantern Investments

Melville, NY

Shawn McLaughlin

McLaughlin Ryder Investments, Inc.

Alexandria, VA

Gil Mogavero

JMP Securities LLC

San Francisco, CA

Linde Murphy

M.E. Allison & Co., Inc.

San Antonio, TX

John Parmigiani

Allied Millennial Partners, LLC

New York, NY

Paige Pierce

Larimer Capital Corporation

Denver, CO

Jim Williams

Financial Telesis Inc.

San Rafael, CA

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