FINRA – Financial Industry Regulatory Authority

The Financial Industry Regulatory Authority, known as FINRA, is a private corporation which is known as a “self regulatory organization.” meaning that is has the authority to regulate its membership. FINRA’s main functions are FINRA Enforcement and FINRA Dispute Resolution

FINRA is the primary regulator for the securities industry, and is responsible for the oversight of the country’s brokerage firms, stock brokers, analysts and other financial professionals. FINRA calls the brokerage firms “members” and calls the individuals it regulates “associated persons” or “registered representatives.”

FINRA Office

FINRA was formed by the merger of the National Association of Securities Dealers, Inc., and the regulatory functions of the New York Stock Exchange, Inc. in 2007.

The NASD was created and registered with the SEC in response to the 1938 Maloney Act amendments to the Securities Exchange Act of 1934, which allowed it to supervise the conduct of its members subject to the oversight of the SEC. In 1971, the NASD created a new computerized stock trading system called the National Association of Securities Dealers Automated Quotations (NASDAQ) stock market.

In July 2007, the SEC approved the formation of a new SRO to be a successor to NASD. The NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange were then consolidated into the Financial Industry Regulatory Authority (FINRA). See SEC Release No. 34-56145

FINRA Enforcement

According to FINRA’s public statements, one of its top priorities is enforcement of its rules, as well as the federal securities laws. FINRA investigates activity which is believes may indicate a securities law violation, and files disciplinary proceedings against firms and their associated persons to address such violations.

A FINRA investigation, which typically starts with a request for an On the Record Interview (“OTR”) is a significant event, as FINRA Enforcement has the authority to fine, suspend or bar brokers and firms. FINRA also has the ability to work with law enforcement which can lead to criminal charges

FINRA’s investigations arise from many sources, including U-5 filings, routine firm examinations, customer complaints, anonymous tips, and referrals from other regulators.

If you are called into a FINRA OTR, you need to be represented by an experienced securities attorney. Your livelihood may be at stake.

FINRA Dispute Resolution

FINRA operates the largest securities arbitration forum in the United States for the resolution of disputes between customers and member firms, as well as between brokerage firm employees and their firms. Virtually all agreements between investors and their stockbrokers include mandatory arbitration agreements, whereby investors (and the brokerage firms) waive their right to trial in a court of law.

In addition, FINRA rules require all brokerage firms and registered persons to arbitrate any customer dispute.

BrokerCheck

BrokerCheck is a free tool to research the background and experience of financial brokers, advisers and firms.

The BrokerCheck database is updated regularly with information provided by the Financial Industry Regulatory Authority (FINRA).

BrokerCheck allows investors to make informed choices about brokers and brokerage firms-and provides easy access to investment adviser information. BrokerCheck tells you instantly whether a person or firm is registered, as required by law, to sell securities (stocks, bonds, mutual funds and more), offer investment advice or both.

BrokerCheck gives you a snapshot of a broker’s employment history, regulatory actions, and investment-related licensing information, arbitrations and complaints.

It is important to remember that BrokerCheck reports unverified complaints from customers, which have not been verified by any court, arbitration panel or regulator.

To view the latest data, go to https://brokercheck.finra.org/. To search for a specific broker or firm, enter the name in the box at the top left of the page.

Securities lawyer Mark Astarita provides a detailed description and walk-through of FINRA arbitration titled Introduction to Securities Arbitration.

Throughout our site, we may refer to the organization as the “NASD” or FINRA.

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