Broker-Dealers Closing, But at a Slower Pace

Posted by adaniels in Blog on May 9, 2012

There are approximately 11%fewer broker-dealers now than there were in 2007, according to a new study. However, the pace of broker-dealers has been slowing since last near.  Investment News says that the Compliance Department, a consulting organization, discovered that 93 broker-dealers closed in the first quarter of 2012, while 137 did the year before.

In addition, there are more such businesses closing than opening their doors. In the first quarter of 2012, 44 broker-dealers opened their doors, which is fewer than the 57 who opened for business in 2011. And the Financial Industry Regulatory Authority (FINRA) there were 4,428 broker-dealers in existence as of March 2012, which is around 11% fewer than the 5,005 open in 2007.

David Alsup of the Compliance Department told Investment News that he didn’t “see an end to the steady downtick” of broker-dealers’ shutting their doors, “and I don’t see an uptick for a while. He indicated that the increasing regulation of such businesses was hurting the small broker-dealer. “You just can’t be a two-man shop and hire a $70,000-per-year compliance officer and stay in business,” he said.

On a more positive note, Alsup told Investment News that around 10 broker-dealers were shutting their doors each month, which is slightly smaller than the 12 a month closing a month in recent years. He said that was due to an increase in trading and the economy improving slightly.

Written by Lisa Swan


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