Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,405 brokerage firms, about 162,780 branch offices and approximately 629,865 registered securities representatives.

FINRA has approximately 3,200 employees and operates from Washington, DC, and New York, NY, with 20 regional offices around the country.

FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms.

FINRA is the Financial Industry Regulatory Authority. They are an independent, not-for-profit organization with a public mission: to protect America’s investors by making sure the securities industry operates fairly and honestly. They do that by writing and enforcing rules governing the activities of nearly 4,500 securities firms with approximately 636,000 brokers.

Their independent regulation plays a critical role in America’s financial system—by enforcing high ethical standards, bringing the necessary resources and expertise to regulation and enhancing investor safeguards and market integrity—all at no cost to taxpayers.

FINRA continues that tradition today with a commitment to protect investors through strong enforcement and effective investor education. Because in an often unpredictable marketplace, investors need to know FINRA is looking out for them. More than 53 million American households are invested in the U.S. capital markets. FINRA is every investor’s advocate—for stronger protections and a healthier marketplace.

FINRA functions

Safeguard the investing public against fraud and bad practices. FINRA writes and enforces rules and regulations for every single brokerage firm and broker in the United States. They also investigate and discipline brokers and firms that violate the public trust.

Examine firms. Every day, hundreds of professionally trained FINRA financial examiners are in the field taking a close look at the way brokers operate, with a focus on the greatest risks to the markets and investors. They conduct routine examinations, as well as inquiries based on investor complaints and suspicious activity. They consult with other regulators, determine examination priorities and conduct special “sweeps” to target issues of immediate concern.

Enforce industry rules and federal securities laws. They foster investor confidence through vigorous enforcement. They can bring disciplinary actions against firms or individuals, meaning we can fine them, suspend them—even expel them—from the business. And they frequently require firms to provide restitution to investors who have been harmed.

Register, test and educate brokers. They require all brokers to be licensed and registered by FINRA, pass their qualification exams and satisfy continuing education requirements. As a result, FINRA maintains the largest and most sophisticated online registration and reporting system in the world—known as the Central Registration Depository. In addition, their BrokerCheck® system allows investors to check out the professional and disciplinary backgrounds of firms and brokers online: www.finra.org/brokercheck.

Review communications from firms to investors. They require that all broker advertisements, websites, sales brochures and other communications present information in a fair and balanced manner. And certain communications—those related to mutual funds, variable products and options—must be filed directly with FINRA. Every year, FINRA reviews more than 90,000 individual advertisements and communications from firms to investors.

Monitor the markets. They monitor what’s happening in the U.S. stock market—by looking for suspicious trading activity in all stocks, bonds and options traded on the New York Stock Exchange, NYSE Arca, NYSE Amex, NASDAQ Stock Market and the International Securities Exchange.

Educate and inform investors. They believe an essential component to investor protection is investor education. They offer a range of free educational resources to help investors build their financial knowledge to better understand the markets and basic principles of saving and investing. The FINRA Investor Education Foundation is the largest of its kind in the U.S.: www.finrafoundation.org.

Hear disputes. When problems between brokers and investors occur, they administer the largest forum specifically designed to resolve securities-related disputes between and among investors, securities firms and individual brokers. They have 72 hearing locations around the country—including at least one in each state—and in London and Puerto Rico.

Every firm and broker that sells securities in the U.S. must be licensed and  registered by FINRA

  4,500 securities firms 164,000 branch offices 636,000 registered securities representatives

Advantages of having FINRA

Every investor deserves fundamental protections when investing in the stock market. Whether Americans are investing in a 401(k) or other thrift, savings or employee benefit plan, or in a mutual fund, ETF or variable annuity, FINRA works every day to ensure that: anyone who sells a securities product has been officially tested, qualified and licensed every securities product advertisement used is truthful, and not misleading any securities product promoted or sold to an investor is suitable for that investor’s needs investors receive complete disclosure about the investment product before purchase

Their website, www.finra.org, has information and tools to help investors make better sense of saving and investing, manage money more wisely and steer clear of risky situations. They offer unbiased information that helps investors learn how to protect themselves and invest for the future. Easy to access and easy to use, www.finra.org alerts investors about new investment scams, explains which professional titles are real and which aren’t and offers advice on how to weather tough financial times. All the financial tools mentioned before—plus more—can be found here. FINRA’s website places critical financial information all in one place. Whether they want to learn more about annuities and insurance, or stocks, bonds and mutual funds, investors can find unbiased information and tools they can trust.

FINRA is located in communities across America. With 20 offices and nearly 3,200 employees deployed throughout the country, FINRA is dedicated to ensuring that our nation’s financial markets are fair and honest. And because we operate in the communities where firms do business and disputes occur, they understand emerging issues affecting investors right in their own neighborhoods.

Greater transparency strengthens financial markets and empowers investors. FINRA offers tools to track price and yield data for fixed income securities. Their Trade Reporting and Compliance Engine (TRACE) system helps all investors better monitor their investments by putting timely and accurate sales and pricing information for corporate and agency bonds in their hands.

Alert investors are better investors. FINRA teaches investors how to avoid becoming victims — making them aware of the latest investment scams and showing them how to identify common techniques used by unlicensed agents selling phony products. The more information investors have, the safer they’ll be.

Investors need and want more knowledge about investing. Today, 100 million Americans are entering or nearing retirement, but many haven’t saved enough—and simply don’t know enough about saving and investing. By offering unbiased information, tools and guidance to investors, FINRA makes it easier to navigate retirement and avoid common investing pitfalls.

How FINRA helps make a difference

FINRA is every investor’s advocate.

When an elderly investor was overcharged as much as $1.2 million in commission fees, FINRA took action. FINRA investigation found that APS Financial Corporation overcharged several customers on 59 transactions, 43 of which involved the elderly investor’s account. APS didn’t disclose the mark-ups to the customers, and in some cases, charged fees as high as 67 percent. FINRA expelled the Texas firm and barred the firm’s former president and a broker from the securities industry.

In another case, FINRA  barred a registered sales assistant from the securities industry for misappropriating nearly $750,000 from 22 vulnerable customers, some of whom were elderly or ill. FINRA also fined the assistant’s employer, Citigroup Global Markets, Inc., for supervisory lapses that allowed the misconduct to continue.

When a broker switched his elderly and unsophisticated customers in and out of mutual funds without their permission, FINRA took action. As a result of the scheme, the broker, William Bailey, received commissions on the sales charges and trading fees generated by the unauthorized trades. FINRA suspended Bailey for two years for improperly trading in customer accounts.

When Morgan Keegan marketed and sold bond funds to investors with sales material that contained exaggerated claims and didn’t accurately disclose the funds’ risks, FINRA worked to ensure the investors got their money back. Morgan Keegan agreed to pay restitution of $200 million to investors who bought shares of the seven bond funds.

FINRA sets high ethical standards for financial firms. One of top priorities is to ensure that firms are operating fairly and openly with investors. Firms regulated by FINRA are subjected to strict regulatory requirements, including rules for broker conduct and examinations and vigorous enforcement to ensure that those rules are followed.

FINRA offers innovative tools to help investors make the right choices. Want up-to-the-minute market news and information. Market Data Center and  Fund Analyzer will help you in it.

FINRA helps employees save for—and protect—their futures. They work to make sure that investors steer clear of fraud and other problems that stand in the way of financial security. FINRA’s BrokerCheck helps investors check a broker’s disciplinary background— and whether he or she is licensed. Their Risk Meter enables investors to determine if they share characteristics and behavior traits that may make them more vulnerable to investment fraud. And, their Scam Meter can help investors assess whether an investment opportunity is too good to be true.

FINRA alerts investors about new product pitfalls. When they have a serious concern about a new investment product, we share it with investors by publishing investor alerts.