Financial Industry Regulatory Authority

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Financial Industry Regulatory Authority
FINRA logo.gif
Founded 2007 (replaces NASD)
Headquarters Washington, D.C./New York City, with 15 district offices
Products Regulation of U.S. securities firms
Web site http://www.finra.org/

The Financial Industry Regulatory Authority (FINRA), is the largest non-governmental regulator for all securities firms doing business in the U.S. FINRA oversees nearly 5,100 brokerage firms, about 174,000 branch offices and more than 672,000 registered securities representatives.

History

FINRA was created through the consolidation of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, and went into operation on July 30, 2007.[1]

NYSE Regulation's three divisions (Market Surveillance, Enforcement, and Listed Company Compliance) regulate equities and options trading and listing compliance for the New York Stock Exchange, NYSE Arca, and NYSE Alternext US.

FINRA Services

FINRA's charter is one of investor protection and the maintenance of market integrity through "effective and efficient regulation and complementary compliance and technology-based services."

With about 3,000 employees, FINRA operates from Washington, DC, and New York, with 15 district offices across the United States.

The scope of FINRA's services include registration and education of industry participants; examining securities firms; writing rules and enforcing those rules in addition to federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering dispute resolution forums for investors and registered firms.

FINRA also performs market regulation under contract for The NASDAQ Stock Market, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange.

In December 2014 FINRA signed an agreement with the Chicago Board Options Exchange and C2 Options Exchange to take over the self-regulatory duties of those exchanges. FINRA will provide market surveillance and other regulatory services to CBOE and C2 starting Jan. 1 2015.[2]

FINRA Leadership

BrokerCheck

FINRA has created an online service known as "BrokerCheck,"[3] which provides information about current and former FINRA-registered firms. It also provides information about individuals who are currently FINRA-registered or have been registered with FINRA within the last two years as well as about firms who are currently or in the past registered with FINRA. The service allows investors to learn, among other things, whether a broker is licensed in the investor's state to conduct business or whether he/she has been sanctioned by securities regulators for violations of investment-related regulations or statutes.

BrokerCheck was established in 1998. The Dodd-Frank Act, passed in response to the financial crisis, required regulators to develop ways to make the free website more user friendly and more accessible to investors.

In February of 2010, FINRA announced it would seek authority to expand the amount of information available to the public on current and former securities brokers through its free online BrokerCheck service.[4]

In early 2013, FINRA proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to the Finra BrokerCheck website. The rule was submitted to the SEC for approval but FINRA later withdrew the measure to fine-tune it after receiving more than two dozen outside comments.[5]

Rules to Expunge Brokers' Records

A new rule, approved in December 2007, requires arbitrators to undertake a more rigorous review of a broker's request to expunge their record on the Central Registration Depositary (CRD) after an arbitration claim.[6]

Under this rule, arbitrators are required to hold a recorded hearing session by phone or in person and provide a brief written explanation of reasons for ordering an expungement. In cases involving a settlement, where the agreement requires the client to consent to a request for an expungement, arbitrators are now required to consider the settlement terms, including amounts paid to any party.

FINRA indicates that the rule is designed to assure that any expungement of complaints is limited to certain situations. Under Conduct Rule 2130, arbitrators can only order expungement if the claim, allegation or information in the dispute is factually impossible or clearly erroneous; if the registered person was not involved in the alleged misconduct; or if the claim, allegation or information is false.

Educational Requirements/Initiatives

  • Continuing education for registered persons and broker-dealers: Together with other self-regulatory organizations and the Securities Industry/Regulatory Council on Continuing Education, FINRA administers a two-part mandatory continuing education program. The program consists of a regulatory element and a firm element. The regulatory element requires all registered persons to take computer-based training in industry rules and regulations on the second anniversary of their initial securities registration and every three years after that. The firm element requires broker-dealers to keep their "covered persons" – employees who deal with customers, and their supervisors – up to date on job - and product-related subjects by way of an annual firm-developed and administered training program.
  • FINRA podcasts are a series of podcasts, issued frequently, that highlight news, regulatory updates and other compliance topics. FINRA has created podcasts as a convenient way to get compliance-related information into the hands of compliance professionals. Podcasts cover compliance topics, updates and speeches. Those interested in hearing these audio reports can listen either from their desktop computer or can download to a portable digital media player.
  • For Investors: The FINRA Investor Education Foundation is the largest foundation in the United States dedicated to investor education. As of June 2007, the Foundation had approved $10.4 million in grants and an additional $10.2 million in direct investor education programming. FINRA also is a founding member of the Alliance for Investor Education. [7]

In 2007 FINRA Investor Education Foundation grants exceeded $14M for programs and research projects aimed at the investing public.[8]

Resources

FINRA Investor Education Foundation Site

References

  1. "NASD and NYSE Member Regulation Combine to Form the Financial Industry Regulatory Authority - FINRA". FINRA.
  2. FINRA Signs Regulatory Services Agreement with CBOE and C2. FINRA.
  3. BrokerCheck Web Site. FINRA.
  4. Press Release. FINRA.
  5. Regulator Plans to Increase Visibility of Its BrokerCheck Website. The New York Times Dealbook.
  6. "Wiping the Slate Clean,” February 1, 2008. On Wall Street.
  7. Members. Alliance for Investor Education.
  8. "FINRA Investor Education Foundation Grants Exceed $14M”. FINRA.