What is Financial Industry Regulatory Authority & What Do They Do?

2 mins

Regulating the finance industry is a task that is managed by several local, national, private, and international monitoring firms around the world. One such firm, specific to the United States of America, is FINRA.

What Does FINRA Stand For?

Financial Industry Regulatory Authority

What is FINRA?

FINRA, or the Financial Industry Regulatory Authority, is an independent, privately-owned, non-governmental organization that implements the laws and regulation governing registered brokers and brokerage firms in the United States of America. The organization was created out of a merger between the NYSE’s regulatory committee and the NASD. FINRA has been providing regulatory oversight to firms in the USA since 1939. The mission of FINRA is “to safeguard the investing public against fraud and bad practices”.

What Does FINRA Do? 

FINRA regulates securities - i.e, financial instruments, such as stocks or bonds - that can be traded freely on the open market. The organization works towards safeguarding investors in securities, maintaining market integrity, and ensuring a thriving, vibrant capital market. FINRA educates stakeholders on how the securities market functions, changes in the market, new regulations, and how to keep up with them. They are also tasked with the duty of combating financial crimes, and are consequently involved in promoting anti-money laundering techniques. In 2020, with the Coronavirus pandemic taking the world by storm, the threat of financial crime is higher than ever. So, organizations such as FINRA have made it their job to keep the public informed about aml risks in the COVID-19 era.

Roles and Responsibilities

To ensure that:

  • Every investor receives the basic protection they deserve
  • Anyone who sells a securities product is licensed and qualified
  • Rules are strictly implemented, so securities advertisements are not misleading
  • All securities sold to investors are suitable for their individual needs
  • Investors receive a complete disclosure before purchasing any investment products

What is FINRA License and Registration?

Being a regulatory authority, FINRA is responsible for vetting, assessing, and licensing any firm in the United States that is looking to enter the securities market. The organization oversees each firm’s operations and further conducts examinations, in order to ensure they operate in a compliant manner. FINRA also reviews any advertisements, brochures, and websites to make sure the information is presented honestly and fairly. Therefore, in order to sell or trade any securities, firms must be authorized and licensed by FINRA. The body is also empowered by the U.S. Securities and Exchange Commission (SEC) to fine and discipline any non-compliant firms. FINRA completed more than 1,500 disciplinary actions and levied fines of around USD 44 million in 2019.