“What Is” FINRA?

finra-logoThe Financial Industry Regulatory Authority (FINRA) is the largest, independent regulator of securities firms working in U.S. trading markets. A non-governmental and non-for-profit organization, FINRA’s mission is to serve all investors, ranging from large, corporate investors to individuals. The organization’s primary goal is to ensure that all investors receive basic protection by regulating and monitoring broker/dealers and other market participants in the securities industry.

More specifically, FINRA aims to ensure that:

  • Individuals that sell securities have been officially qualified and licensed;
  • All securities advertisements are truthful. For instance, communications about mutual funds and options must be directly filed through FINRA;
  • All financial products promoted or sold to investors are suitable for their particular needs;
  • Investors obtain full information about a product before purchase.

Some of the key responsibilities of FINRA are: examinations of securities firms; penalties and fines against firms that violate laws, FINRA rules and the public trust; and public trade reporting. FINRA also monitors markets for suspicious activity.

In terms of regulation, FINRA writes and enforces rules for every broker and brokerage firm in the country. In conjunction with enforcing these specific financial regulations, FINRA also works to enforce federal mandates governing securities.

In addition, FINRA registers and tests brokers through the Central Registration Depository, in order to ensure that all brokers are sufficiently qualified and educated.

The organization also offers free educational resources for investors.

A precursor to FINRA was the National Association of Securities Dealers (NASD) whose self-regulatory activities overlapped with the member regulation, enforcement and arbitration operations of the New York Stock Exchange (NYSE).

Ultimately to streamline and strengthen their efforts, FINRA was created via the consolidation of NASD with the NYSE self-regulatory units. The merger was announced on Nov. 28, 2006, approved by the SEC on July 26, 2007, and took effect July 30, 2007.

FINRA officials say they oversee 4,320 brokerages, 163,350 branch offices and 635,315 registered securities industry representatives. In addition, FINRA has approximately 3,300 employees and operates from Washington, DC, and New York, NY, with 20 regional offices around the country.

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