FINRA (Financial Industry Regulatory Authority)

The Financial Industry Regulatory Authority (FINRA) is a non-governmental organization that regulates member brokerage firms and exchange markets in the United States. Created in 2007 from the consolidation of the National Association of Securities Dealers (NASD) and the enforcement arm of the New York Stock Exchange, FINRA plays a crucial role in maintaining the integrity of the securities industry. For instance, it oversees 3,500 brokerage firms and approximately 630,000 registered representatives, ensuring that they adhere to required standards and practices.

FINRA’s responsibilities include enforcing rules that govern the conduct of brokers and dealers, conducting market surveillance, and providing investor education. A common misconception is that FINRA is a government agency; however, it operates independently and is funded primarily by the fees it collects from its member firms. For example, a firm may pay annual fees based on its size, which can range from $1,000 to over $100,000, depending on the volume of business it conducts.

An essential aspect of FINRA’s work is its investor protection initiatives. It provides resources to help investors understand their rights and the risks associated with investing. One key takeaway for investors is to check if their broker is registered with FINRA by using its BrokerCheck tool, which offers insights about a broker’s employment history, qualifications, and any disciplinary actions.

In summary, FINRA is vital in ensuring that the financial markets operate fairly and honestly, protecting investors from fraud and misconduct. By understanding FINRA’s role and utilizing its resources, investors can make more informed decisions and safeguard their financial interests.