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RECOGNITION (STEP 1) OCCURS WHEN AN ENTITY CONCLUDES THAT A TAX POSITION, BASED SOLELY ON ITS TECHNICAL MERITS, IS MORE LIKELY THAN NOT TO BE SUSTAINED UPON EXAMINATION. IN STEP 2 (MEASUREMENT), THE TAX BENEFIT IS MEASURED AS THE LARGEST AMOUNT OF BENEFIT, DETERMINED ON A CUMULATIVE PROBABILITY BASIS, THAT IS MORE LIKELY THAN NOT TO BE REALIZED UPON ULTIMATE SETTLEMENT. DURING THE YEARS FROM 2008 TO 2011, WHICH REPRESENT THE YEARS MANAGEMENT CONSIDERS TO BE OPEN FOR EXAMINATION BY TAXING AUTHORITIES, MANAGEMENT DID NOT IDENTIFY THE EXISTENCE OF ANY UNCERTAIN TAX POSITIONS. ACCORDINGLY, ALL TAX POSITIONS ARE RECOGNIZED AND MEASURED AT THEIR FULL BENEFIT IN THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS. true FINRA INVESTOR EDUCATION FOUNDATION 1735 K STREET NW WASHINGTON DC 20006 200863779 501(C)(4) 1500000 CONTRIBUTION 1 Form 990, Schedule I Description of Organization's Procedures for Monitoring the Use of Grants DURING 2011, FINRA, INC. MADE AN UNRESTRICTED CONTRIBUTION OF $1.5 MILLION TO THE FINRA INVESTOR EDUCATION FOUNDATION (THE FOUNDATION), A WHOLLY-OWNED SUBSIDIARY, FOR PROGRAMS AND PROJECTS CONSISTENT WITH THE FOUNDATION'S MISSION. THE FOUNDATION IS A TAX-EXEMPT ORGANIZATION UNDER SECTION 501(C)(4) AND ITS MISSION IS TO PROVIDE UNDERSERVED AMERICANS WITH THE KNOWLEDGE, SKILLS AND TOOLS NECESSARY FOR FINANCIAL SUCCESS THROUGHOUT LIFE. THE CONTRIBUTION WAS REVIEWED AND APPROVED BY THE FINANCE AND OPERATIONS COMMITTEE OF FINRA, INC.'S BOARD PRIOR TO PAYMENT. THE FINRA INVESTOR EDUCATION FOUNDATION BOARD IS RESPONSIBLE FOR APPROVING AND MONITORING ALL GRANTS. SEE THE FOUNDATION'S FORM 990 FOR ADDITIONAL DETAILS ON THE GRANT APPROVAL AND MONITORING PROCESS. X X X X X true true X X X X X true true false RICHARD G KETCHUM 979862 0 1200000 0 920124 0 42384 0 26814 0 3169184 0 483350 0 TODD T DIGANCI 476030 0 660000 0 29890 0 33238 0 25500 0 1224658 0 0 0 MARCIA E ASQUITH 222553 0 225000 0 24096 0 70847 0 34138 0 576634 0 0 0 T GRANT CALLERY 355363 0 297000 0 35289 0 81751 0 31373 0 800776 0 0 0 MARTIN P COLBURN 382398 0 430000 0 20469 0 110762 0 29069 0 972698 0 0 0 JAMES J CUMMINGS 203275 0 310000 0 156911 0 50019 0 33905 0 754110 0 0 0 JAMES P DONOVAN 132566 0 500000 0 777502 0 119699 0 1536 0 1531303 0 1082909 0 LINDA D FIENBERG 0 440248 0 417800 0 32132 0 62263 0 17246 0 969689 0 0 SAMUEL H GAER 495092 0 200000 0 2490 0 108218 0 23516 0 829316 0 200000 0 TRACY B JOHNSON 266175 0 0 0 40688 0 59365 0 11781 0 378009 0 0 0 STEPHEN LUPARELLO 0 590030 0 690000 0 41655 0 34415 0 28029 0 1384129 0 0 MARC MENCHEL 0 390734 0 400000 0 305051 0 38232 0 30181 0 1164198 0 0 HOWARD M SCHLOSS 422030 0 325000 0 10525 0 31493 0 40966 0 830014 0 0 0 STEPHEN M SCHOENEMAN 305080 0 250000 0 22487 0 87109 0 31759 0 696435 0 0 0 THOMAS M SELMAN 0 336385 0 315000 0 22255 0 62590 0 20826 0 757056 0 0 JAMES R ALLEN 142951 0 147000 0 338564 0 36848 0 13423 0 678786 0 57051 0 EILEEN M FAMIGLIETTI 242658 0 112500 0 132537 0 24790 0 25591 0 538076 0 0 0 STEVEN A JOACHIM 345708 0 400000 0 23148 0 295324 0 34005 0 1098185 0 0 0 GREGORY B RAYMOND 279184 0 225000 0 7112 0 99126 0 36287 0 646709 0 0 0 ROBERT L WOOD 290546 0 225000 0 159271 0 25806 0 26584 0 727207 0 0 0 SUPPLEMENTAL COMPENSATION INFORMATION FOR THE HIGHEST COMPENSATED EXECUTIVES, BASE SALARY AND INCENTIVE COMPENSATION (EARNED IN THE PRIOR YEAR) REPORTED IN COLUMNS B(i) AND B(ii) ARE INDEPENDENTLY DETERMINED AND APPROVED BY THE MANAGEMENT COMPENSATION COMMITTEE OF THE BOARD OF GOVERNORS. IN DETERMINING SALARIES AND INCENTIVE PAY, THE COMMITTEE RELIED ON A THIRD-PARTY COMPENSATION STUDY PERFORMED BY MERCER, INC. THAT COMPARED FINRA EXECUTIVES TO INDUSTRY BENCHMARKING DATA. OTHER REPORTABLE COMPENSATION (COLUMN B(iii)) IS LARGELY COMPOSED OF RETIREMENT VESTING AND/OR PAYOUT EVENTS FROM NON-QUALIFIED PLANS, AS WELL AS SEVERANCE OR SEPARATION PAYMENTS, IF APPLICABLE. FINRA OFFERS TWO NON-QUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. 1) FINRA'S SUPPLEMENTAL DEFINED BENEFIT PLAN IS A NON-QUALIFIED DEFINED BENEFIT PLAN THAT IS PROVIDED TO MEMBERS OF A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES SUCH AS THOSE DESCRIBED UNDER 201(2), 301(A)(3), AND 401(A)(1) OF ERISA. IT IS A FINRA FUNDED PLAN THAT VESTS AT SPECIFIED AGE AND SERVICE MILESTONES. THIS PLAN WAS CLOSED TO NEW ENTRANTS AS OF 12/31/05. 2) FINRA'S SUPPLEMENTAL DEFINED CONTRIBUTION PLAN IS A NON-QUALIFIED PLAN THAT IS OPEN TO VICE PRESIDENTS AND ABOVE WITH AN ANNUAL BASE PAY ABOVE THE QUALIFIED LIMIT. IT IS ONLY OPEN TO THOSE NOT PARTICIPATING IN THE CLOSED NON-QUALIFIED DEFINED BENEFIT PLAN DESCRIBED ABOVE. IT IS A FINRA FUNDED PLAN WITH A 3 YEAR VESTING CYCLE WITH ANNUAL VESTING BEGINNING AT AGE 62. ADDITIONAL INFORMATION CONCERNING FINRA'S RETIREMENT PLANS AND OTHER PARTICIPANTS IS PROVIDED BELOW. SCHEDULE J, PART I, LINE 1 FIRST CLASS OR CHARTER TRAVEL: THE NEXT CABIN ABOVE ECONOMY IS ALLOWED FOR INTERNATIONAL TRAVEL TO AND FROM THE U.S. INCLUDING CANADA AND MEXICO, WHERE THE FLIGHT TIME IS OVER FOUR HOURS DIRECT. IT IS ALSO ALLOWED FOR ALL TRAVEL FROM THE U.S. MAINLAND TO HAWAII AND FOR FLIGHTS WITHIN EUROPE THAT ARE OVER FOUR HOURS IN DURATION. OTHERWISE, ECONOMY CLASS IS REQUIRED. REIMBURSEMENT TO BOARD MEMBERS FOR FIRST CLASS TRAVEL EXPENSES INCURRED WHILE ATTENDING BOARD AND CORPORATE COMMITTEE MEETINGS ON BEHALF OF FINRA, FINRA REGULATION, AND FINRA DISPUTE RESOLUTION IS PERMITTED. TRAVEL FOR COMPANIONS: IN LIEU OF A WEEKEND FLIGHT HOME, A COMPANION MAY FLY TO MEET AN EMPLOYEE ON AN EXTENDED STAY AT HIS OR HER WORK LOCATION. AIRLINE TICKETS FOR WEEKEND COMPANIONS MUST BE FOR DOMESTIC FLIGHTS, AND MUST BE PURCHASED WITH A PERSONAL CREDIT CARD. THE EMPLOYEE WILL RECEIVE REIMBURSEMENT NOT TO EXCEED WHAT THE COST OF A TICKET TO FLY THE EMPLOYEE HOME FOR THE WEEKEND WOULD HAVE BEEN. FINRA WILL NOT REIMBURSE EMPLOYEES FOR COMPANION TRAVEL TO INTERNATIONAL LOCATIONS. THE REIMBURSEMENT AMOUNT WILL BE A TAXABLE FRINGE BENEFIT TO THE EMPLOYEE, AND THE EMPLOYEE IS RESPONSIBLE FOR ALL TAXES. COMPANION WEEKEND TRAVEL MUST BE APPROVED BY THE EMPLOYEE'S DEPARTMENT DIRECTOR AND THE MANAGER OF CORPORATE TRAVEL SERVICES BEFORE THE TRIP. COMPANION MEALS, GROUND TRANSPORTATION AND AIRPORT PARKING ARE AT THE EMPLOYEE'S EXPENSE AND CANNOT BE CHARGED TO THE CORPORATE CREDIT CARD OR SUBMITTED FOR REIMBURSEMENT. WHEN COMPANIONS ARE INVITED ON BEHALF OF FINRA, FINRA REGULATION, AND FINRA DISPUTE RESOLUTION TO BOARD MEETINGS, THEIR AIRFARE IS REIMBURSABLE. TAX INDEMNIFICATION: GIFTS TO EMPLOYEES ARE CONSIDERED TAXABLE COMPENSATION UNDER THE IRS CODE. THE FAIR MARKET VALUE OF THE GIFT TO THE EMPLOYEE WILL BE INCLUDED AS WAGES ON THE EMPLOYEE'S W-2. IN GENERAL, IT IS FINRA'S PRACTICE TO "GROSS UP," OR ADJUST THE WAGES AND TAXES SO THAT THE TAX EFFECT OF RECEIVING A GIFT IS NEUTRAL TO THE EMPLOYEE. IT IS ALSO FINRA'S PRACTICE TO "GROSS-UP" EMPLOYEE RELOCATION EXPENSES, AS WELL AS FOOD AND LODGING EXPENSES INCURRED AS PART OF THE EXECUTIVE HEALTH PLAN. HEALTH AND CLUB DUES: AS PART OF ITS WELLNESS PROGRAM, FINRA OFFERS SUBSIDIZED GYM MEMBERSHIPS TO EMPLOYEES OF FINRA AND SUBSIDIARIES AT CERTAIN LOCATIONS. ALSO, THE CEO'S CONTRACT PROVIDES FOR UP TO A MAXIMUM AMOUNT OF $20,000 EACH CALENDAR YEAR FOR ADMISSION FEES, DUES AND HOUSE CHARGES OF ONE CLUB IN EACH OF THE NEW YORK CITY AND WASHINGTON, D.C. METROPOLITAN AREAS TO BE USED FOR BUSINESS PURPOSES. EXECUTIVE HEALTH PLAN: THE EXECUTIVE HEALTH PLAN IS AVAILABLE TO FINRA STAFF AT A LEVEL OF EXECUTIVE VICE PRESIDENT AND ABOVE AND OTHER EMPLOYEES AS DESIGNATED BY THE CEO. THE EXECUTIVE HEALTH PLAN COVERS PROCEDURES RELATED TO THE DIAGNOSIS AND PREVENTION OF A MEDICAL CONDITION(S). THE FINRA EXECUTIVE HEALTH PLAN PROVIDES FOR ONE ASSESSMENT PER YEAR. PERSONAL SERVICES: THE CEO'S CONTRACT PROVIDES FOR A CAR AND DRIVER IN BOTH NEW YORK CITY, NEW YORK AND WASHINGTON, D.C. TO BE USED FOR BUSINESS PURPOSES. THESE SERVICES, WHICH ARE USED PRINCIPALLY BY THE CEO, ARE USED BY OTHER FINRA EMPLOYEES FOR BUSINESS PURPOSES WHEN AVAILABLE. THE CEO'S CONTRACT ALSO PROVIDES FOR COSTS INCURRED RELATED TO PERSONAL FINANCIAL AND TAX COUNSELING, UP TO $20,000 PER CALENDAR YEAR, AS WELL AS SPOUSAL TRAVEL FOR CERTAIN BUSINESS-RELATED EVENTS. SUPPLEMENTAL COMPENSATION INFORMATION SCHEDULE J, PART I, LINES 4A AND 4B 4A) IN CONNECTION WITH JAMES R. ALLEN'S SEPARATION FROM FINRA, HE WAS PAID $57,449.59 IN 2011. IN CONNECTION WITH JAMES P. DONOVAN'S SEPARATION FROM FINRA, HE WAS PAID $367,307.11 IN 2011. 4B) FINRA OFFERS TWO NON-QUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. ANNUAL INCREASES IN BENEFIT VALUE, CLIFF VESTING EVENTS, AND PAYOUT DIFFERENTIALS ARE TAXABLE IN THE YEAR IN WHICH THEY OCCUR AND ARE REPORTED IN COLUMN B(iii) OF SCHEDULE J, PART II. UNVESTED BENEFIT AND CONTRIBUTION ACCRUALS ARE TAX DEFERRED AND ARE REPORTED IN COLUMN C OF SCHEDULE J, PART II. 1) FINRA'S SUPPLEMENTAL DEFINED BENEFIT PLAN IS A NON-QUALIFIED DEFINED BENEFIT PLAN THAT IS PROVIDED TO MEMBERS OF A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES SUCH AS THOSE DESCRIBED UNDER 201(2), 301(A)(3), AND 401(A)(1) OF ERISA. IT IS A FINRA FUNDED PLAN THAT VESTS AT SPECIFIED AGE AND SERVICE MILESTONES. THIS PLAN WAS CLOSED TO NEW ENTRANTS AS OF 12/31/05. PARTICIPANTS IN THE NON-QUALIFIED DEFINED BENEFIT PLAN THAT HAD AN INCREMENTAL INCREASE IN PRESENT VALUE OF PARTICIPANT BENEFIT VALUE FROM PRIOR YEAR INCLUDE: STEPHEN LUPARELLO - $24,554 MARC MENCHEL - $297,850 PARTICIPANTS IN THE SUPPLEMENTAL NON-QUALIFIED DEFINED BENEFIT PLAN THAT HAD A GROSS TAXABLE PAYOUT INCLUDE: JAMES R. ALLEN - $234,507 2) FINRA'S SUPPLEMENTAL DEFINED CONTRIBUTION PLAN IS A NON-QUALIFIED PLAN THAT IS OPEN TO VICE PRESIDENTS AND ABOVE WITH AN ANNUAL BASE PAY ABOVE THE QUALIFIED LIMIT. IT IS ONLY OPEN TO THOSE NOT PARTICIPATING IN THE CLOSED NON-QUALIFIED DEFINED BENEFIT PLAN DESCRIBED ABOVE. IT IS A FINRA FUNDED PLAN WITH A 3 YEAR VESTING CYCLE WITH ANNUAL VESTING BEGINNING AT AGE 62. PARTICIPANTS IN THE SUPPLEMENTAL NON-QUALIFIED DEFINED CONTRIBUTION PLAN WITH CONTRIBUTIONS VESTING IN 2011 INCLUDE: RICHARD G. KETCHUM - $892,140 JAMES P. DONOVAN - $366,070 EILEEN M. FAMIGLIETTI - $129,027 ROBERT L. WOOD - $155,165 PARTICIPANTS IN THE SUPPLEMENTAL NON-QUALIFIED DEFINED CONTRIBUTION PLAN THAT HAD A GROSS TAXABLE PAYOUT INCLUDE: NONE VOLUNTARY COMPENSATION DISCLOSURES: SETH H. WAUGH WAS A VOLUNTEER BOARD MEMBER IN 2011 AND DID NOT RECEIVE COMPENSATION FOR HIS SERVICES. NYSE EURONEXTNYSE REGULATION SCHEDULE L, PART V 32410301 SCHEDULE L, PART V false BNY CONVERGEX HOLDINGS LLC SCHEDULE L, PART V 20615911 SCHEDULE L, PART V false DEUTSCH BANK AMERICAS SCHEDULE L, PART V 13807778 SCHEDULE L, PART V false PERSHING LLC SCHEDULE L, PART V 6500852 SCHEDULE L, PART V false IBM SCHEDULE L, PART V 1447612 SCHEDULE L, PART V false FED EX SCHEDULE L, PART V 928023 SCHEDULE L, PART V false EDWARD JONES SCHEDULE L, PART V 448311 SCHEDULE L, PART V false LPL FINANCIAL SCHEDULE L, PART V 362019 SCHEDULE L, PART V false BNY MELLON SCHEDULE L, PART V 181832 SCHEDULE L, PART V false STERN AGEE LEACH SCHEDULE L, PART V 147292 SCHEDULE L, PART V false MEGAN PELUSO SCHEDULE L, PART V 79663 SCHEDULE L, PART V false BUSINESS TRANSACTIONS INVOLVING INTERESTED PERSONS FORM 990, SCHEDULE L, PART V FINRA'S BYLAWS DO NOT CLASSIFY DIRECTORS AS INDEPENDENT OR NOT INDEPENDENT. AS A SELF-REGULATORY ORGANIZATION, BOARD MEMBERS ARE CLASSIFIED AS "PUBLIC" OR "INDUSTRY" AND A MAJORITY OF THE BOARD MUST ALWAYS MEET THE "PUBLIC" DEFINITION. ADDITIONALLY, ANY TRANSACTIONS WITH COMPANIES THAT EMPLOY A BOARD MEMBER, OR FOR WHICH A BOARD MEMBER MAY SERVE AS A MEMBER OF ITS DIRECTORATE, INCLUDING THOSE LISTED BELOW, WERE CONDUCTED IN THE ORDINARY COURSE OF BUSINESS AND DO NOT REFLECT SPECIAL ARRANGEMENTS BETWEEN INTERESTED PARTIES. HOWEVER, THE IRS DEFINITION OF AN INDEPENDENT VOTING MEMBER OF A GOVERNING BODY IS SPECIFIC TO THE FORM 990, AND APPLIES A CIRCUMSTANCES-BASED APPROACH FOCUSING ON COMPENSATION AS AN EMPLOYEE, COMPENSATION AS AN INDEPENDENT CONTRACTOR (EXCLUSIVE OF REASONABLE COMPENSATION FOR SERVING ON THE BOARD), AND A DOLLAR THRESHOLD FOR PAYMENTS MADE TO OR RECEIVED FROM ANOTHER ORGANIZATION IN THE ORDINARY COURSE OF BUSINESS. PLEASE SEE PAGE 17 OF THE 2011 FORM 990 INSTRUCTIONS FOR THE COMPLETE IRS DEFINITION. ELLYN L. BROWN IS A MEMBER OF THE BOARDS OF NYSE EURONEXT AND NYSE REGULATION, INC. AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID NYSE RELATED ORGANIZATIONS $29,899,233 FOR OCCUPANCY AND COMMUNICATION SERVICES, AND $2,511,067 FOR CERTAIN PASS-THROUGH FEES COLLECTED BY FINRA AND REMITTED TO NYSE REGULATION, INC. RICHARD F. BRUECKNER IS A MEMBER OF THE BOARD OF BNY CONVERGEX HOLDINGS LLC AND WAS A MEMBER OF THE FINRA BOARD OF GOVERNORS. BNY CONVERGEX GROUP PAID FINRA $20,615,911 FOR REGULATORY SERVICES, TRANSACTION AND REPORTING FEES. RICHARD F. BRUECKNER IS THE CHAIRMAN OF PERSHING LLC AND WAS A MEMBER OF THE FINRA BOARD OF GOVERNORS. PERSHING LLC PAID FINRA $6,500,852 FOR REGULATORY SERVICES, TRANSACTION AND REPORTING FEES. RICHARD F. BRUECKNER IS THE CHIEF OF STAFF OF BNY MELLON AND WAS A MEMBER OF THE FINRA BOARD OF GOVERNORS. BNY MELLON PAID FINRA $181,832 FOR REGULATORY SERVICES. MARK S. CASADY IS THE CHAIRMAN AND CEO OF LPL FINANCIAL AND JOHN J. BRENNAN IS A DIRECTOR OF LPL FINANCIAL AND BOTH SERVE AS MEMBERS OF THE FINRA BOARD OF GOVERNORS. LPL FINANCIAL PAID FINRA $362,019 FOR REGULATORY SERVICES, TRANSACTION AND REPORTING FEES. W. DENNIS FERGUSON IS THE DIRECTOR OF CLEARING FOR STERNE, AGEE & LEACH, INC. AND IS A MEMBER OF THE FINRA BOARD OF GOVERNORS. STERNE, AGEE & LEACH, INC. PAID FINRA $147,292 FOR TRANSACTION AND REPORTING FEES. DR. SHIRLEY ANN JACKSON IS A DIRECTOR AT FED-EX AND IS A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID FED-EX $928,023 FOR SERVICES. DR. SHIRLEY ANN JACKSON IS A DIRECTOR AT IBM AND IS A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID IBM $1,447,612 FOR SERVICES. RICHARD S. PECHTER IS A MEMBER OF THE BOARD OF NYSE REGULATION, INC., AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID NYSE RELATED ORGANIZATIONS $29,899,233 FOR OCCUPANCY AND COMMUNICATION SERVICES, AND $2,511,067 FOR CERTAIN PASS-THROUGH FEES COLLECTED BY FINRA AND REMITTED TO NYSE REGULATION, INC. MEGAN E. PELUSO IS AN EMPLOYEE OF FINRA AND IS THE DAUGHTER OF T. GRANT CALLERY, EVP AND GENERAL COUNSEL OF FINRA. FINRA PAID MS. PELUSO ANNUAL COMPENSATION OF $79,664. JOHN W. SCHMIDLIN IS A MEMBER OF THE BOARD OF NYSE REGULATION, INC., AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID NYSE RELATED ORGANIZATIONS $29,899,233 FOR OCCUPANCY AND COMMUNICATION SERVICES, AND $2,511,067 FOR CERTAIN PASS-THROUGH FEES COLLECTED BY FINRA AND REMITTED TO NYSE REGULATION, INC. KURT P. STOCKER IS A MEMBER OF THE BOARD OF NYSE REGULATION, INC., AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. FINRA PAID NYSE RELATED ORGANIZATIONS $29,899,233 FOR OCCUPANCY AND COMMUNICATION SERVICES, AND $2,511,067 FOR CERTAIN PASS-THROUGH FEES COLLECTED BY FINRA AND REMITTED TO NYSE REGULATION, INC. SETH H. WAUGH IS CEO OF DEUTSCHE BANK AMERICAS AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. DEUTSCHE BANK AMERICAS PAID FINRA $13,807,778 FOR REGULATORY SERVICES, TRANSACTION AND REPORTING FEES. JAMES D. WEDDLE IS THE MANAGING PARTNER OF EDWARD JONES AND A MEMBER OF THE FINRA BOARD OF GOVERNORS. EDWARD JONES PAID FINRA $448,311 FOR REGULATORY SERVICES, TRANSACTION AND REPORTING FEES. VOLUNTARY DISCLOSURE FOR FINANCIAL INFORMATION THE FINANCIAL INFORMATION INCLUDED IN THE FORM 990 IS PRESENTED ON A STAND-ALONE BASIS WITH ALL SIGNIFICANT INTERCOMPANY RECEIVABLE AND PAYABLE AMOUNTS ELIMINATED AND DOES NOT REPRESENT THE CONSOLIDATED RESULTS FOR FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (FINRA) AND ITS SUBSIDIARIES. THE 2011 FORM 990 SHOULD BE READ IN CONNECTION WITH THE 2011 FINRA ANNUAL FINANCIAL REPORT WHICH IS AVAILABLE ON WWW.FINRA.ORG. SEE ALSO SEPARATE 2011 FORM 990'S FOR RELATED ENTITIES, INCLUDING FINRA DISPUTE RESOLUTION, INC., FINRA REGULATION, INC., AND FINRA INVESTOR EDUCATION FOUNDATION. ORGANIZATIONAL ACHIEVEMENTS AND PROGRAM SERVICES FORM 990, PART III, LINE 4 FINRA AND ITS RELATED ENTITIES TOUCH VIRTUALLY EVERY ASPECT OF THE SECURITIES BUSINESS - FROM REGISTERING AND EDUCATING INDUSTRY PARTICIPANTS TO EXAMINING SECURITIES FIRMS; WRITING RULES; ENFORCING THOSE RULES AND THE FEDERAL SECURITIES LAWS; INFORMING AND EDUCATING THE INVESTING PUBLIC; PROVIDING TRADE REPORTING AND OTHER INDUSTRY UTILITIES; AND ADMINISTERING THE LARGEST DISPUTE RESOLUTION FORUM FOR INVESTORS AND REGISTERED FIRMS. BUSINESS AND FAMILY RELATIONSHIPS FORM 990, PART VI, LINE 2 BOARD MEMBER RICHARD F. BRUECKNER HAD A BUSINESS RELATIONSHIP DURING 2011 WITH JOHN J. BRENNAN AND MARK S. CASADY. MR. BRUECKNER IS CHAIRMAN OF PERSHING LLC, WHICH PERFORMS CLEARING SERVICES FOR BROKER-DEALERS WITHIN LPL FINANCIAL, OF WHICH MR. BRENNAN IS A BOARD MEMBER AND MR. CASADY IS CHAIRMAN AND CEO. BOARD MEMBERS WILLIAM H. HEYMAN AND RICHARD F. BRUECKNER HAD A BUSINESS RELATIONSHIP DURING 2011. MR. BRUECKNER IS A MEMBER OF THE EXECUTIVE COMMITTEE OF BNY MELLON, WHICH IS A MEMBER OF THE TRAVELERS' BANK LENDING SYNDICATE AND PROVIDES CUSTODIAL SERVICES TO THE TRAVELERS COMPANIES. MR. HEYMAN IS VICE CHAIRMAN AND CHIEF INVESTMENT OFFICER OF THE TRAVELERS COMPANIES, WHICH ALSO DOES BUSINESS WITH THE FIXED INCOME DEALER DESK OF BNY MELLON. BOARD MEMBERS WILLIAM H. HEYMAN AND SETH H. WAUGH HAD A BUSINESS RELATIONSHIP DURING 2011. MR. WAUGH IS CEO OF DEUTSCHE BANK AMERICAS, WHICH IS A MEMBER OF THE TRAVELERS' BANK LENDING SYNDICATE. MR. HEYMAN IS VICE CHAIRMAN AND CHIEF INVESTMENT OFFICER OF THE TRAVELERS COMPANIES, WHICH ALSO DOES BUSINESS WITH THE FIXED INCOME DEALER DESK OF DEUTSCHE BANK. BOARD MEMBERS RICHARD F. BRUECKNER AND SETH W. WAUGH HAD A BUSINESS RELATIONSHIP IN 2011. MR. BRUECKNER IS CHAIRMAN OF PERSHING LLC, WHICH PERFORMS CLEARING SERVICES FOR DEUTSCHE BANK AMERICAS, FOR WHICH MR. WAUGH SERVES AS CEO. BOARD MEMBERS RICHARD F. BRUECKNER AND W. DENNIS FERGUSON HAD A BUSINESS RELATIONSHIP IN 2011. MR. BRUECKNER IS CHAIRMAN OF PERSHING LLC, WHICH DOES BUSINESS WITH STERNE AGEE CLEARING, FOR WHICH MR. FERGUSON SERVES AS PRESIDENT. BOARD MEMBERS RICHARD F. BRUECKNER AND JAMES D. WEDDLE HAD A BUSINESS RELATIONSHIP DURING 2011. MR. BRUECKNER IS A MEMBER OF THE EXECUTIVE COMMITTEE OF BNY MELLON, WHICH PROVIDES CUSTODIAL SERVICES FOR EDWARD JONES, OF WHICH MR. WEDDLE IS THE MANAGING PARTNER. BOARD MEMBERS JOHN J. BRENNAN AND MARK S. CASADY HAD A BUSINESS RELATIONSHIP DURING 2011 AS MR. CASADY IS CHAIRMAN AND CEO OF LPL FINANCIAL AND MR. BRENNAN SERVES AS A BOARD MEMBER. BOARD MEMBERS JOHN J. BRENNAN AND ELLYN L. BROWN HAD A BUSINESS RELATIONSHIP DURING 2011 AS THEY SERVED TOGETHER AS TRUSTEES OF THE FINANCIAL ACCOUNTING FOUNDATION. STEPHEN LUPARELLO AND GARY H. STERN HAD A BUSINESS RELATIONSHIP DURING 2011 AS THEY SERVE TOGETHER ON THE BOARD OF THE DEPOSITORY TRUST AND CLEARING CORPORATION. THE FOLLOWING FINRA REGULATION, INC. AND FINRA DISPUTE RESOLUTION, INC. BOARD MEMBERS ALSO SERVED TOGETHER AS MEMBERS OF THE BOARD OF NYSE REGULATION DURING 2011: ELLYN L. BROWN (ALSO NYSE EURONEXT) DR. SHIRLEY ANN JACKSON (ALSO NYSE EURONEXT) RICHARD S. PECHTER JOHN W. SCHMIDLIN KURT P. STOCKER THE FOLLOWING FINRA REGULATION, INC. AND FINRA DISPUTE RESOLUTION, INC. BOARD MEMBERS ALSO SERVED TOGETHER AS MEMBERS OF THE NYSE REGULATION'S COMMITTEE FOR REVIEW DURING 2011: ELLYN L. BROWN JOHN F.X. DOLAN RICHARD S. PECHTER JOHN W. SCHMIDLIN DESCRIPTION OF CLASSES OF MEMBERS OR STOCKHOLDERS FORM 990, PART VI, LINE 6 FINRA IS ORGANIZED AS A NONSTOCK, NOT-FOR-PROFIT, MEMBERSHIP CORPORATION. NO REVENUES OR EARNINGS MAY BE USED FOR THE BENEFIT OF ANY INDIVIDUAL OR MEMBER. ANY REGISTERED BROKER, DEALER, MUNICIPAL SECURITIES BROKER OR DEALER, OR GOVERNMENT SECURITIES BROKER OR DEALER IS ELIGIBLE FOR MEMBERSHIP IN THE CORPORATION, EXCEPT FOR THOSE WHO FAIL OR CEASE TO SATISFY THE CORPORATION'S QUALIFICATION REQUIREMENTS, OR BECOMES DISQUALIFIED, OR FAILS TO FILE CERTAIN FORMS AS THE CORPORATION PRESCRIBES. THE MEMBERS OF THE CORPORATION GENERALLY HAVE NO VOTING RIGHTS, OTHER THAN TO VOTE ON (1) AMENDMENTS TO THE BY-LAWS OF THE CORPORATION, (2) BUSINESS RAISED DURING THE ANNUAL OR SPECIAL MEETINGS OF MEMBERS, (3) THE ELECTION OF THE SMALL FIRM, MID-SIZED FIRM AND LARGE FIRM GOVERNORS, OR (4) OTHERWISE PROVIDED BY THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE OR FINRA'S RESTATED CERTIFICATE OF INCORPORATION. SMALL FIRM MEMBERS (ANY BROKER OR DEALER ADMITTED TO MEMBERSHIP IN THE CORPORATION WHICH, AT THE TIME OF DETERMINATION, HAS AT LEAST 1 AND NO MORE THAN 150 REGISTERED PERSONS) ARE ENTITLED TO VOTE FOR THE ELECTION OF THE THREE SMALL FIRM GOVERNORS, MID-SIZE FIRM MEMBERS (AT LEAST 151 AND NO MORE THAN 499 REGISTERED PERSONS) ARE ENTITLED TO VOTE FOR THE ELECTION OF THE SINGLE MID-SIZE FIRM GOVERNOR, AND LARGE FIRM MEMBERS (500 OR MORE REGISTERED PERSONS) ARE ENTITLED TO VOTE FOR THE ELECTION OF THE THREE LARGE FIRM GOVERNORS. DESCRIPTION OF CLASSES OF PERSONS AND THE NATURE OF THEIR RIGHTS FORM 990, PART VI, LINE 7A SMALL FIRM MEMBERS ARE ENTITLED TO VOTE FOR THE ELECTION OF SMALL FIRM GOVERNORS, MID-SIZE FIRM MEMBERS ARE ENTITLED TO VOTE FOR THE ELECTION OF MID-SIZE FIRM GOVERNORS, LARGE FIRM MEMBERS ARE ENTITLED TO VOTE FOR THE ELECTION OF LARGE FIRM GOVERNORS, IN ACCORDANCE WITH THE PROCEDURES FOR SUCH A VOTE AS PROVIDED IN THE CORPORATION'S BY-LAWS. CLASSES OF PERSONS, DECISIONS REQUIRING APPROVAL & TYPE OF VOTING RIGHTS FORM 990, PART VI, LINE 7B THE CORPORATION'S MEMBERS ARE ENTITLED TO VOTE ON ANY AMENDMENT TO THE BY-LAWS OF THE CORPORATION, IN ACCORDANCE WITH THE PROCEDURES FOR SUCH A VOTE AS PROVIDED IN THE CORPORATION'S BY-LAWS. PROCESS USED TO REVIEW FORM 990 FORM 990, PART VI, LINE 11 THE FORM 990 WAS REVIEWED BY SENIOR MANAGEMENT AT VARIOUS STEPS THROUGHOUT THE PREPARATION CYCLE. THE AUDIT AND MANAGEMENT COMPENSATION COMMITTEES REVIEWED AND APPROVED THE ORGANIZATION'S 2011 FORM 990 ON SEPTEMBER 12, 2012. THE BOARD WAS PROVIDED ACCESS TO THE FINAL FORM 990 FOR REVIEW (VIA A WEBSITE FOR BOARD MEMBERS ONLY) PRIOR TO FILING. ENFORCEMENT OF CONFLICT OF INTEREST POLICY FORM 990, PART VI, LINE 12C THE ORGANIZATION HAS WRITTEN CONFLICT OF INTEREST POLICIES FOR BOARD MEMBERS AND EMPLOYEES. THE WRITTEN CONFLICT OF INTEREST POLICY FOR BOARD MEMBERS REQUIRES INITIAL DISCLOSURE OF INTERESTS THAT COULD GIVE RISE TO CONFLICTS AS WELL AS ANNUAL DISCLOSURE BY THE SAME BOARD MEMBERS. ADDITIONALLY, THE WRITTEN POLICY CONTAINS AN ONGOING OBLIGATION OF BOARD MEMBERS TO DISCLOSE POTENTIAL CONFLICTS OF INTEREST AS THEY ARISE. THE EMPLOYEE CONFLICT OF INTEREST POLICY REQUIRES EMPLOYEES TO CERTIFY ANNUALLY AS TO THEIR COMPLIANCE WITH THE WRITTEN POLICY. THE WRITTEN POLICY CONTAINS AN ONGOING OBLIGATION FOR EMPLOYEES TO INFORM FINRA OF ALL BROKERAGE ACCOUNTS IN WHICH THEY HAVE AN INTEREST AND TO ARRANGE FOR FINRA TO RECEIVE DUPLICATE ACCOUNT STATEMENTS. FINRA REVIEWS TRANSACTIONS IN EMPLOYEES' BROKERAGE ACCOUNTS TO ENSURE COMPLIANCE WITH FINRA'S INVESTMENT RESTRICTIONS. AMONG OTHER THINGS, THESE RESTRICTIONS PROHIBIT EMPLOYEES FROM HAVING AN INTEREST IN A BROKER-DEALER OR ENTITY THAT DERIVES 10% OR MORE OF ITS REVENUE, NET OF INTEREST EXPENSE, FROM BROKER-DEALER SUBSIDIARIES OR AFFILIATES. A LIST OF PROHIBITED COMPANIES IS POSTED ON FINRA'S CORPORATE INTRANET. FINRA'S DEPARTMENT HEADS HAVE ACCESS TO SEVERAL ONLINE REPORTS THAT HELP THEM AVOID ASSIGNING AN EMPLOYEE TO WORK ON A PROJECT THAT WOULD GIVE RISE TO A CONFLICT. FOR INSTANCE, A MANAGER CAN DETERMINE WHETHER AN EMPLOYEE'S STOCK HOLDINGS WOULD CONFLICT WITH A PROPOSED FINRA ASSIGNMENT (E.G., ASSIGNING AN EMPLOYEE TO NEGOTIATE A CONTRACT WITH A VENDOR IN WHICH THE EMPLOYEE HAS A SIGNIFICANT STOCK POSITION). EMPLOYEES ARE REGULARLY REMINDED OF THE RESOURCES THAT ARE AVAILABLE WHEN THEY ARE UNSURE WHAT TO DO. IN ADDITION TO TALKING TO DEPARTMENTAL MANAGEMENT, EMPLOYEES CAN DISCUSS CONFLICT-RELATED CONCERNS WITH FINRA'S OFFICE OF GENERAL COUNSEL OR ETHICS MANAGER. IF THEY ARE UNCOMFORTABLE DISCLOSING AN ISSUE AND DISCLOSING THEIR IDENTITY, THEY CAN USE FINRA'S 24-HOUR ETHICSPOINT HOTLINE TO POSE QUESTIONS OR REPORT CONCERNS. COMMUNICATIONS MADE THROUGH ETHICSPOINT ARE CONFIDENTIAL AND, IF THE EMPLOYEE WISHES, ANONYMOUS. FINRA'S WHISTLEBLOWER POLICY FORBIDS RETALIATION AGAINST EMPLOYEES WHO REPORT SUSPECTED MISCONDUCT IN GOOD FAITH, EVEN IF THE REPORT ULTIMATELY PROVES TO BE ERRONEOUS. PROCESS TO DETERMINE COMPENSATION OF TOP OFFICIALS, OFFICERS & KEY EMP. FORM 990, PART VI, LINES 15A AND 15B THE MANAGEMENT COMPENSATION COMMITTEE OF THE FINRA BOARD OF GOVERNORS (THE "COMMITTEE") IS RESPONSIBLE FOR SETTING PAY FOR EXECUTIVES OF FINRA AND SUBSIDIARIES WHOSE TOTAL COMPENSATION, INCLUDING INCENTIVE COMPENSATION, MAY EXCEED $1 MILLION. THE COMMITTEE IS COMPRISED OF FOUR NON-EMPLOYEE, NON-SECURITIES INDUSTRY MEMBERS OF THE BOARD OF GOVERNORS. THE COMMITTEE MET ON NOVEMBER 8, 2010, DECEMBER 7, 2010, JANUARY 24, 2011, AND AGAIN ON FEBRUARY 2, 2011 TO ESTABLISH INCENTIVE COMPENSATION ATTRIBUTABLE TO THE PERFORMANCE OF SERVICES DURING CALENDAR YEAR 2010 AND TO ESTABLISH BASE SALARIES FOR CALENDAR YEAR 2011. AS A GENERAL POLICY, FINRA HAS DETERMINED ITS COMPETITIVE COMPENSATION POSITIONING SHOULD BE CONSIDERED AGAINST A BROAD SECTION OF FINANCIAL SERVICES/CAPITAL MARKET COMPANIES, AS THIS SECTOR IS THE MOST LIKELY FROM WHICH WE RECRUIT TALENT AND TALENT IS RECRUITED FROM US. WE ALSO BENCHMARK AGAINST GENERAL INDUSTRY POSITIONS AND LAW DEPARTMENTS FOR JOBS THAT ARE NOT UNIQUE TO THE FINANCIAL SERVICES INDUSTRY. THE COMMITTEE ENGAGED MERCER, INC. ("MERCER"), A THIRD-PARTY COMPENSATION CONSULTANT, TO PREPARE A COMPENSATION STUDY FOR REVIEW AT THESE MEETINGS. IN DETERMINING A BENCHMARKING STRATEGY FOR KEY EXECUTIVES, FINANCIAL SERVICES ORGANIZATIONS (BROKER-DEALERS, INVESTMENT BANKS, FEDERAL RESERVE BANKS, COMMERCIAL BANKS, INSURANCE COMPANIES, EXCHANGES AND REGULATORS) WERE DETERMINED TO BE THE MOST RELEVANT GROUPS FOR COMPARISON PURPOSES. THE COMMITTEE AND MERCER ENGAGED IN SUBSTANTIAL RESEARCH AND CONSIDERATION OF THE FUNCTIONS AND OPERATIONS OF SEVERAL POTENTIAL COMPARATORS AS WELL AS GENERAL COMPETITIVE CONDITIONS. IN DETERMINING SALARY AND INCENTIVE COMPENSATION, MANAGEMENT AND THE COMMITTEE ALSO CONSIDER OPERATIONAL, STRATEGIC AND FINANCIAL FACTORS IN ADDITION TO INDIVIDUAL PERFORMANCE. THE COMMITTEE'S MINUTES OF THE NOVEMBER 8, 2010, DECEMBER 7, 2010, JANUARY 24, 2011 AND FEBRUARY 2, 2011 MEETINGS WERE REVIEWED AND APPROVED AS ACCURATE AND COMPLETE FOLLOWING THE COMMITTEE'S APPROVAL OF THE SENIOR EXECUTIVE COMPENSATION PACKAGES. THE FULL BOARD FURTHER APPROVED THE 2010 INCENTIVE COMPENSATION OF THE CEO AT ITS MEETING ON FEBRUARY 2, 2011. ALL COMPENSATION COMMITTEE MEMBERS VOTED FOR THE PROPOSED LEVEL OF EXECUTIVE COMPENSATION. PUBLIC AVAILABILITY OF GOVERNING DOCUMENTS, CONFLICT OF INTEREST POLICY, AND FINANCIAL STATEMENTS FORM 990, PART VI, LINE 19 THE ORGANIZATION MAKES ITS GOVERNING DOCUMENTS AND THE FINRA CONSOLIDATED AUDITED FINANCIAL STATEMENTS AVAILABLE UPON REQUEST. ESTIMATED AVERAGE HOURS PER WEEK FORM 990, PART VII, COLUMN B - ESTIMATED AVERAGE PER WEEK THE OFFICERS / KEY EMPLOYEES LISTED IN FORM 990, PART VII, DEVOTE AN AVERAGE TOTAL OF 60 HOURS PER WEEK TO THE FILING ORGANIZATION AND ANY OR ALL OF THE FOLLOWING RELATED ORGANIZATIONS: FINRA REGULATION, INC., FINRA DISPUTE RESOLUTION, INC. AND FINRA INVESTOR EDUCATION FOUNDATION. OTHER CHANGES IN NET ASSETS OR FUND BALANCES FORM 990, PART XI, LINE 5 OTHER CHANGES IN NET ASSETS OR FUND BALANCES PRIMARILY RELATE TO ANY OR ALL OF THE FOLLOWING: CHANGES IN NET INCOME/(LOSS), UNRECOGNIZED EMPLOYEE BENEFIT PLAN AMOUNTS AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS. FOR ADDITIONAL INFORMATION PLEASE SEE THE 2011 FINRA ANNUAL FINANCIAL REPORT WHICH IS AVAILABLE ON WWW.FINRA.ORG. 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