Page 46 - Investment Advisor July/August 2021

BROKER-DEALER BEAT

By Melanie Waddell and Jeff Berman

Number of Registered Reps Falls for Fifth

Straight Year: FINRA

Also, a closer looks at “gamification” and its risks — and benefits — to BDs

and clients.

he total number of broker-deal-
ers registered with the Financial
TIndustry Regulatory Authority
continues to decline, falling by 2.3% —
or by 82 firms — to 3,435 in 2020 from
3,517 in 2019, according to FINRA’s 2021
industry snapshot.
The total number of registered rep-
resentatives dropped 1.1% — or by
7,125 individuals — to 617,549 regis-
tered reps in 2020 vs. 624,674 in 2019.
The number of registered reps has
fallen every year since 2016. The num-
ber of BDs has fallen every year since day. FINRA will have to re-examine its activity that FINRA regulates. The 2021
at least 2011. sales practice programs and priorities to edition includes new statistics on U.S.
Of the total number of registered reps assess whether they continue to address Treasury volume and corporate financ-
in 2020, 317,936 were registered purely the real risks in the industry — it may be ing filings. It also includes 2020 data on
with broker-dealers versus 299,613 who that the future of broker-dealer regula- the size and geographic distribution of
were dually registered with BDs and tion is focused on trading and execution the firms FINRA regulates, the number
RIAs. The former figure has been falling more than sales practices.” of individuals in the industry, equity and
over the past few years, while the latter As to the number of firms leaving the fixed income trading activity, and how
has been rising. industry, 206 left in 2019 versus 210 in firms marketed their products and ser-
Susan Schroeder, vice chair of 2020. In 2019, there were 116 firms that vices last year.
WilmerHale’s securities and financial left the industry versus 128 in 2020. Six states hold the vast majority of
services department and former head of The snapshot is FINRA’s annual sta- firms: New York (1,482), California
enforcement at FINRA, told Investment tistical report on the brokerage firms, (948), Florida (690), Illinois (616), Texas
Advisor in an email that “the decreasing registered representatives and market (609) and New Jersey (453).
number of individual registered repre-
sentatives is significant. We’ve all seen
the impact of new technology and how
easy it can be to trade on an app — many Gamification Offers Benefits,
investors want electronic self-directed
accounts and no intermediation by any Risks to BDs and Clients
individual broker.”
FINRA’s largest regulatory programs, amification techniques that Concerns about gamification took
Schroeder continued, “like its sales Gare increasingly being used by center stage last year when William F.
practice exams, are largely focused on Robinhood and other online trading Galvin, Massachusetts’ top securi-
individual representatives’ interactions platforms offers broker-dealers and ties regulator accused Robinhood
with broker-dealer customers. But fewer their clients various benefits, but of violating state law by using over-
individual registered representatives present risks to them as well, accord- ly “aggressive tactics to attract new, Adobe Stock
actually interact with customers every ing to FINRA. often inexperienced, investors” and

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