Miami Investment & Fraud Attorneys
305.372.9700
1 SE 3rd Ave # 1200
SunTrust International Center
Miami, Florida 33131

What is FINRA?

With so many regulatory bodies, it can be easy to become confused about which organization is responsible for which tasks. FINRA, the Financial Industry Regulatory Authority, formerly the National Association of Securities Dealers, is one of those regulatory bodies. What does FINRA do, and how does it compare to the Securities and Exchange Commission? Read below for more information on this important regulatory organization.

What is FINRA?

FINRA is the Financial Industry Regulatory Authority. It is non-governmental in nature, and was previously called the National Association of Securities Dealers. It functions as an independent regulator of securities firms in the United States (in fact, as the largest of all U.S. independent regulators). It was founded (in the form of the NASD) in 1939 in response to new securities transaction regulations such as the Securities Exchange Act of 1934 and the 1938 Malone Act amendments and eventually merged with the New York Stock Exchange’s divisions of regulation, arbitration, and enforcement to cut down on overlap of duties and cost inefficiency. It was FINRA that launched the computerized stock trading system termed the National Association of Securities Dealers Automated Quotations (NASDAQ) and it continues to be one of the most influential regulatory organizations involved with United States securities.

What does FINRA do?

All broker-dealers in the United States are required to be members of FINRA. FINRA functions as a regulatory agency over all its members. It provides functions like overseeing equities, bonds, futures, and options trading, conducting regulatory exams of institutions under it, providing licenses to individuals and firms in the industry, developing regulations guiding the behavior of investment entities, and other tasks. FINRA is considered “under” the Securities and Exchange Commission in that it answers to the SEC as the governing body regulating trading activities in the United States. Where it generates regulations for its member organizations, FINRA bases its rules on federal securities laws.

How is FINRA Different from the SEC?

As mentioned above, FINRA is subject to the control and regulation of the Securities and Exchange Commission. The primary mission of the SEC is to protect investors as well as to maintain the integrity of the markets by requiring truthful and non-fraudulent conduct from companies involved in buying and selling securities. It was created in the aftermath of the stock market crash of 1929 and sought to restore investor confidence in the markets, and aims to keep investors from being harmed by fraudulent public companies or dishonest individuals dealing with securities. The primary mission of FINRA is similar but not identical. FINRA is membership-based self-rgulatory organization, and works to oversee all member stockbrokers and brokerage firms, also prioritizing transparency and honesty in trading.

More Information

When there are issues surrounding the conduct of member organizations of FINRA, arbitrations generally occur. If you are involved in FINRA arbitrations or believe you may become involved in the near future, you may benefit from legal assistance and advice. FINRA arbitrations can be complex legal endeavors that require a qualified and experienced hand. You can contact an experienced investment and financial attorney at Carlson & Associates, P.A. in Miami at 1-305-372-9700 today for a consultation.

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