TheCorporateCounsel.net

FINRA filings are about to get significantly more expensive! Under a rule change submitted last fall, they are going to phase in higher fees over the course of the next few years. FINRA doesn’t receive tax dollars – it relies on fees to fund its mission of regulating brokers. It’s been over a decade since some of the fees have last increased. Not surprisingly, FINRA says that the current fee structure isn’t keeping up with costs.

For Section 7 – which spells out the fees that apply to reviews of proposed underwriter arrangements for public offerings under FINRA Rule 5110 – FINRA is hiking the fee cap for non-WKSIs by 400%! Here’s more detail:

Section 7 of Schedule A to the FINRA By-Laws sets forth the fees associated with filing documents pursuant to the Corporate Financing Rule. It currently provides for a flat fee of $500 plus .015% of the proposed maximum aggregate offering price or other applicable value of all securities registered on an SEC registration statement or included on any other type of offering document (where not filed with the SEC), with a cap of $225,500; or a fee of $225,500 for an offering of securities filed with the SEC and offered pursuant to Securities Act Rule 415 by a Well-Known Seasoned Issuer (“WKSI”) as defined in Securities Act Rule 405. The fee associated with any amendment or other change to the documents initially filed with Corporate Financing is also subject to the current $225,500 cap.

FINRA has not raised the fee cap since 2012. FINRA is proposing to increase and modify the fee cap beginning in July 2025 as follows:

Corporate Financing Public Offering Review Fee Cap – Proposed Implementation
IPO	2024	2025	2026	2027	2028	2029
Non-WKSI	$225,000	$1,125,000	$1,125,000	$1,125,000	$1,125,000	$1,125,000
WKSI	$225,000	$270,000	$324,000	$389,000	$467,000	$560,000

 

This proposed rule change would raise the fee cap to $1,125,000, which would account for the significant growth in the size of offerings since the cap was last raised in 2012. However, for WKSIs, the cap would be raised to $560,000 over a period of five years. FINRA notes that raising the caps would also create more consistency with the SEC IPO review fee, which has no cap.

FINRA projects that increasing the cap as proposed would capture 81% of the incremental revenues if there were no cap while bounding the impact on WKSIs whose offerings tend to be less resource intensive for Corporate Financing to review. FINRA believes such fees are and would continue to be paid for by, or passed through to, issuers. When the proposed fee increase is fully implemented, it is designed to generate an additional $31 million in annual revenue by 2029.

In addition, FINRA is implementing a private placement review fee for private offerings that exceed $25 million and that use a registered broker-dealer. The cap for those fees is around $40k.

The new fees go into effect on July 1st. This Alston & Bird memo offers a couple important action items:

Issuers and FINRA members are advised to prepare for the implementation of these increased and new fees and consider their impact on future offerings from a budgetary standpoint and, in the case of private placements, to update expense reimbursement provisions of placement agent agreements (e.g., to ensure clarity regarding treatment of FINRA filing fees, which we expect would be reimbursable by the issuer outside any expense cap).

– Liz Dunshee