The Financial Industry Regulatory Authority onThursday morning released its annual budget for the firsttime, stating that despite “revenue challenges,” FINRA will notincrease member fees.

Projected revenue is flat for 2018, at about $822 million.

“FINRA is to be applauded for an unprecedented level oftransparency into its budgeting process and financial challenges,”Brad Bennett, former FINRA enforcement chief who’s now a partner atBaker Botts in Washington, said.

“The 2018 budget underscores the magnitude of the operationalhurdles faced by FINRA and the need for significant belttightening,” Bennett adds, pointing to the $136 million in reservesthat FINRA is “committed to spend to make up for the revenueshortfall.”

The self-regulator’s 2018 budget “sends a clear signal thatFINRA intends to wean itself off of its reliance on enforcementfines to bring its revenues in line with its expenses,” Bennettsaid.

“In my experience,” Bennett continued, “enforcement decisionswere never driven by revenue considerations but rather by themerits and facts of the case before FINRA. However, the industrywill surely appreciate the absolute visibility into how enforcementfines are spent.”

FINRA’s budget states that assets under management by memberfirms have increased, the number of registered representatives hasremained largely constant and innovations in fintech and other areas presentnew challenges.

What’s more, the Securities and Exchange Commission is relyingmore on FINRA to supervise broker-dealers.

FINRA CEO Robert Cook and FINRA Chairman William Heyman note inthe budget summary that while FINRA welcomes “theseopportunities, … projected 2018 operating revenue of approximately$822 million is flat relative to 2013, when FINRA last implementedfee increases.”

Instead of hiking member firm fees, in line with thebroker-dealer regulator’s Financial Guiding Principles, FINRA “willleverage excess reserves to support operations while deferring feeincreases.”

The budget summary notes that since 2013, FINRA’s expenseincreases have stayed largely in line with inflation, at an annualrate of approximately 1.5%.

Cost-saving efforts have focused on managing compensation costs,as well as other organizational and process improvements.

FINRA will hold senior officer salaries flat in 2018 as well, asit has for the last two years.

Further, FINRA states that it has identified “further expensereductions for 2018, and through FINRA360, will continue to seekother efficiencies and opportunities to better leveragetechnology.”

• FINRA said that funds from its 2018 will be allocated asfollows among these key functions:
• Member regulation: 32%
• Market regulation: 14%
• Enforcement 12%
• Transparency Services: 8%
• Registration and Disclosure: 7%
• Dispute Resolution: 5%
• Other regulatory operations: 13%