FINRA stands for Financial Industry Regulatory Authority that oversees US-based broker-dealer firms, registered brokers, and market dealings. FINRA is a self-regulatory, private organization authorized by the US government to enforce ethical investment practices amongst registered brokers.
In July 2007, FINRA came into existence after consolidating of National Association of Securities Dealers (NASD) with the member regulation, enforcement, and arbitration operations of the New York Stock Exchange (NYSE). Currently, FINRA supervises more than 624,000 registered brokers across the US and analyzes billions of daily market events.
Empowered by the Securities and Exchange Commission (SEC), FINRA creates rules for brokers and ensures they act accordingly, evaluate the firm’s compliance, and discipline brokers that fail to adhere. For a broker, it is an absolute must to register with FINRA. This registration is possible only after the candidate clears the rigorous application and examination process of FINRA. Anyone can check the broker’s registration status with the FINRA using its online BrokerCheck tool. Besides, investors can access numerous educational resources or file complaints against brokers at FINRA.
FINRA works by dividing its services into a few different but connected departments,
Regulating and overseeing brokers: Even after getting the license from FINRA, every broker must continue ongoing education over the years. Every broker and the firm undergo periodic audits to ensure whether they are practicing honest and competent business practices. If found it non-compliant, FINRA is authorized to take disciplinary actions against the firm or the broker.
Maintaining BrokerCheck database: FINRA offers a free-to-use BrokerCheck tool for everyone to check if the broker they intend to deal with is registered or not. Besides, the tool also provides detailed information about a specific broker or firm. The information covers if they faced any disciplinary action in the past.
Complaint redressal and dispute resolution: FINRA efficiently handles and addresses all the customer complaints leading to legal proceedings. Every complainant gets a lawyer and forum from FINRA to carry out arbitration and mediation between brokers and customers as an alternative to keep away from legal proceedings.
Providing tools and resources to investors: With an array of personal finance and investment encyclopedia, FINRA offers a range of calculators for beginner and advanced investors. It also offers a free investment course for all interested investors. Besides, it has a special helpline for senior citizens and a free toll-free line to assist investors in understanding the different complexities of hard sells made by brokers.
Surveilling equity markets: FINRA is a technology-dominated organization that monitors market integrity and market transactions using cutting-edge technology solutions. Using AI and ML, FINRA finds patterns and trends to spot malicious or fraudulent activities in the market. If it finds anything suspicious, it flags the activity and alerts FINRA’s enforcement team and other relevant parties like SEC to intervene.
FINRA is a very powerful body and can shut down or levy heavy penalties or fines on brokers or firms found guilty of any wrongdoing. Even the compliant organizations find FINRAs regulatory examination extremely complicated. Therefore, you need to keep your organization and clients safe and confident.
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