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What Is FINRA (Financial Industry Regulatory Authority)?

Financial Industry Regulatory Authority FINRA

What is FINRA? The Financial Industry Regulatory Authority (FINRA) is a non-governmental, not-for-profit organization which acts as a self-regulatory body for brokers and dealers in the USA.

The largest governing body of its kind, FINRA functions to protect investors in the United States by overseeing the fair and honest operation of its securities firms. FINRA formed in 2007 as a merger between the regulatory committee of the New York Stock Exchange, and the National Association of Securities Dealers – a move to streamline legislative complexity and remove a substantial amount regulatory redundancy between enforcement bodies.

In 2018, FINRA is responsible for the conduct of over 4,500 brokerage firms, over 162,000 branch offices, and over 600,000 securities representatives. The organization operates from Washington DC and New York, but holds offices in all 50 states, and overseas offices in London and Puerto Rico.

What does FINRA do?

FINRA creates and enforces the rules which govern the United States’ broker-dealer industry and the trade of securities futures, options, corporate bonds, and equities. In its regulatory capacity, FINRA examines US firms for compliance with those rules, monitors suspicious activities, and educates investors. Broadly, FINRA works to ensure that:

Investors receive basic protections, including complete disclosure about purchased products.

Every securities product is tested, qualified and licensed.

Securities products are suitable for the needs of the investors purchasing them.

Securities advertisements, brochures, and websites are presented truthfully.

Anti Money Laundering: One of FINRA’s most important functions is to ensure compliance with the Bank Secrecy Act and the anti-money laundering rules it involves. FINRA sets out the basic standards for US firms’ AML compliance programs but also provides program templates for smaller organizations, and a variety of official AML forms.

FINRA Fines & Penalties

FINRA processes up to 50 billion transactions daily and refers hundreds of cases to other agencies, such as the Securities and Exchange Commission (SEC). In its efforts to detect non-compliance and enforce its rules, FINRA brought 1,369 disciplinary actions against brokerage organizations in the US in 2017, levying $64.89 million in fines, and $66.8 million in restitution to investors.

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Originally published 20 August 2018, updated 26 May 2022

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