Financial Industry Regulatory Authority (FINRA)
What Is the Financial Industry Regulatory Authority (FINRA)?
The Financial Industry Regulatory Authority (FINRA) is a nonprofit self-regulatory organization that oversees brokerage firms and registered brokers in the United States. FINRA helps ensure that securities markets operate fairly and that investors receive honest and transparent information.
FINRA was created in 2007 through the consolidation of the National Association of Securities Dealers (NASD) and regulatory functions of the New York Stock Exchange.
Why It Matters
FINRA plays a key role in protecting investors and maintaining confidence in financial markets. By enforcing rules for brokers and brokerage firms, FINRA helps prevent fraud, unethical practices, and misconduct in the securities industry.
Investors benefit from knowing there is oversight of the professionals who manage or recommend investments.
How FINRA Works
FINRA regulates brokerage firms and their employees through:
- licensing and qualification exams for brokers
- monitoring trading activity and market behavior
- enforcing rules and disciplinary actions
- providing investor education and dispute resolution
FINRA also operates the BrokerCheck tool, which allows investors to research the background of brokers and firms.
Example
An investor researching a financial advisor can use FINRA’s BrokerCheck database to review the advisor’s professional history and any disciplinary actions.
FINRA vs SEC
- FINRA oversees brokerage firms and brokers.
- The SEC is a federal government agency that regulates securities markets and enforces securities laws.
FAQs About FINRA
Is FINRA a government agency?
No. It is a self-regulatory organization authorized by federal law.
Do brokers need FINRA licenses?
Yes. Many brokers must pass FINRA qualification exams.
Can investors file complaints with FINRA?
Yes. FINRA offers dispute resolution services including arbitration.
Related Terms
