Overview
The Financial Industry Regulatory Authority (FINRA) in the USA is a self-regulatory organization established in 2007 from a merger of the National Association of Securities Dealers (NASD) and the regulatory arm of the New York Stock Exchange. A private corporation instead of a government agency, FINRA acts as a professional association for brokers and dealers in the securities market, and is responsible for training, arbitration, and the enforcement of a written code of practice. It advises the US Securities and Exchange Commission (SEC) and serves as a regulator to the New York Stock Exchange (NYSE), NASDAQ, and other leading US markets.
Examples
- Broker Licensing: FINRA oversees the licensing and regulation of stockbrokers and brokerage firms to ensure they meet the standards required to operate in the securities industry.
- Market Surveillance: FINRA monitors trading activities to identify potential market manipulation and fraudulent activities.
- Dispute Resolution: FINRA offers arbitration and mediation services to resolve disputes between consumers and members of the securities industry.
- Investor Education: FINRA educates investors through resources such as the FINRA Investor Education website, offering tools like the BrokerCheck service to verify a broker’s qualifications.
Frequently Asked Questions
What is the role of FINRA in the securities market?
FINRA oversees the activities of brokers and dealers to ensure they comply with fair practices and regulations. This includes licensing, market surveillance, enforcement of rules, arbitration, and investor education.
How does FINRA differ from the SEC?
While the SEC is a government agency with broad oversight of the entire securities industry, including public companies and stock exchanges, FINRA is a private self-regulatory organization focused specifically on the regulation of brokers and dealers.
Can FINRA impose penalties on firms and individuals?
Yes, FINRA can impose penalties, fines, and sanctions on firms and individuals who violate securities laws and regulations.
How does FINRA enforce its rules?
FINRA enforces its rules through a combination of fines, sanctions, and other disciplinary measures. They conduct examinations and investigations to ensure compliance with regulations.
Is FINRA involved in investor education?
Yes, FINRA provides various educational resources and tools to help investors make informed decisions and to protect themselves from fraud.
Related Terms
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Securities and Exchange Commission (SEC): The SEC is a federal agency responsible for overseeing the entire securities market, ensuring fair and efficient markets.
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National Association of Securities Dealers (NASD): The predecessor to FINRA, the NASD was a self-regulatory organization for brokers and dealers in the United States.
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Arbitration: A method used by FINRA to resolve disputes between investors and brokers or brokerage firms.
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BrokerCheck: A FINRA service that allows investors to check the background of brokers and brokerage firms.
Online Resources
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FINRA Official Website: Extensive resources for professionals and private investors, including rules and regulations, investor insights, and educational materials.
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Investor Education at FINRA: Educational resources and tools for investors to make informed decisions.
Suggested Books for Further Studies
- “FINRA Rules and Regulations Guide” by David S. Barrett. An in-depth guide to understanding FINRA’s rules and regulatory framework.
- “Securities Regulation: Cases and Analysis” by Stephen J. Choi and A.C. Pritchard. A comprehensive look at securities regulation including self-regulatory organizations like FINRA.
- “The Essentials of Finance and Accounting for Nonfinancial Managers” by Edward Fields. Provides a broad overview of financial and accounting principles, including regulatory aspects.
Accounting Basics: Financial Industry Regulatory Authority (FINRA) Fundamentals Quiz
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