The Financial Industry Regulatory Authority, or FINRA, is a Self-Regulatory Organization ( SRO) dedicated to investor protection and market integrity. In addition to being an SRO, FINRA is also a non-profit corporation that operates under the supervision of the Securities and Exchange Commission ( SEC). The dual mission of FINRA is to provide investor protection and market integrity in the United States.
What is a Self-Regulatory Organization (SRO)?
A self-regulatory organization (SRO) is an organization that exercises some degree of regulatory authority over an industry. The regulatory authority could exist in place of government regulation, or it can be applied in addition to government regulation. The ability of an SRO to exercise regulatory authority does not necessarily derive from a grant of authority from the government.
FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) and the member regulation, enforcement and arbitration operations of the New York Stock Exchange (NYSE). The government agency which acts as the ultimate regulator of the securities industry and federal securities laws, including FINRA, is the Securities and Exchange Commission ( SEC). In a nutshell, FINRA makes sure the broker-dealer industry operates fairly and honestly. They do this by:
- Writing and enforcing rules governing the activities of 3,800 broker-dealers and 634,000 registered brokers.
- Examining firms for regulatory compliance with those FINRA rules.
- Fostering financial market transparency and educating investors.
FINRA 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.
What is FINRA Technology?
FINRA technology is vital to protecting investors. FINRA technology enables:
- Effective oversight of brokerage firms.
- Accurate monitoring of the U.S. equities markets.
- Quick detection of potential fraud.
- Keeping investors informed through tools like BrokerCheck.
FINRA ActivitiesTo accomplish its dual mission of investor protection and market integrity, FINRA performs the following enforcement actions daily:
- Deter misconduct by enforcing the rules.
- Administering disciplinary action to those who break the rules.
- Detect and prevent wrongdoing in the U.S. markets, including the American Stock Exchange.
- Educate and inform investors and other industry professionals.
- Resolve securities disputes.
FINRA360 is a comprehensive self-evaluation and organizational improvement initiative. It was started in 2017 by FINRA CEO Robert Cook. The objective of FINRA360 is to:
- Ensure that FINRA is operating at its highest effectiveness.
- Protect investors.
- Promote market integrity in a manner that supports strong and vibrant capital markets.
FINRA360 is currently researching the following topics:
- The organization and operation of FINRA’s regulatory functions and whether they are optimal for sharing information and establishing consistent standards.
- The use of data and technology throughout FINRA.
- The tools and metrics used to assess outcomes and success across FINRA’s various regulatory programs and support functions.
What is the Difference between FINRA and the SEC?
In a nutshell, FINRA is the organization that monitors and regulates the U.S. stock market, including stockbrokers and brokerage firms. The mission of the SEC on the hand, is to ensure fairness for investors. The SEC is the primary overseer of the U.S. securities markets and has broad reach. It is a government organization and has oversight of several other agencies, including FINRA. It is also known as the " watchdog of Wall Street."