FINRA

Definition

FINRA, or the Financial Industry Regulatory Authority, is a non-governmental organization that acts as the primary self-regulatory body for the securities industry in the United States. It is responsible for overseeing and regulating the activities of broker-dealers and their representatives, ensuring the fairness and integrity of the securities markets.

5 Must Know Facts For Your Next Test

1. FINRA is responsible for writing and enforcing rules that govern the securities industry, including rules related to sales practices, financial reporting, and customer protection.
2. FINRA conducts examinations of broker-dealers to ensure compliance with federal securities laws and FINRA rules, and can impose sanctions on firms or individuals for violations.
3. FINRA operates the Central Registration Depository (CRD), a national database that contains information about registered securities firms and their employees.
4. FINRA administers qualification examinations, such as the Series 7 and Series 63 exams, which are required for individuals to become licensed as securities representatives.
5. FINRA operates the FINRA Dispute Resolution forum, which provides an alternative to the court system for resolving disputes between investors and their financial advisors.

Review Questions

• Explain the role of FINRA in the framework of securities regulation in the United States.
  • FINRA plays a crucial role in the framework of securities regulation in the United States. As a self-regulatory organization, FINRA is responsible for overseeing and regulating the activities of broker-dealers and their representatives. This includes writing and enforcing rules related to sales practices, financial reporting, and customer protection, as well as conducting examinations to ensure compliance with federal securities laws and FINRA rules. FINRA's regulatory authority helps maintain the fairness and integrity of the securities markets, protecting investors and promoting transparency in the industry.
• Describe the key functions and responsibilities of FINRA in the context of securities regulation.
  • FINRA's key functions and responsibilities in the context of securities regulation include: 1) Writing and enforcing industry rules and standards, 2) Conducting examinations of broker-dealers to ensure compliance, 3) Imposing sanctions on firms or individuals for violations, 4) Operating the Central Registration Depository (CRD) to maintain information about registered securities firms and their employees, 5) Administering qualification examinations for securities representatives, and 6) Providing a dispute resolution forum for investors to resolve disputes with their financial advisors. These functions are critical for maintaining fairness, transparency, and investor protection in the securities markets.
• Analyze how FINRA's role as a self-regulatory organization (SRO) contributes to the overall framework of securities regulation in the United States.
  • FINRA's status as a self-regulatory organization (SRO) is a key aspect of its role in the framework of securities regulation. As an SRO, FINRA has the authority to create and enforce its own rules and standards for the securities industry, rather than relying solely on government regulation. This self-regulatory approach allows FINRA to respond more quickly and effectively to changes in the industry, and to tailor its rules to the specific needs and challenges faced by broker-dealers and their representatives. At the same time, FINRA's oversight and enforcement powers, as well as its coordination with the SEC and other regulatory bodies, help to ensure that the securities markets remain fair, transparent, and well-regulated for the protection of investors. The combination of self-regulation and government oversight creates a robust and comprehensive framework for securities regulation in the United States.

Related terms

Self-Regulatory Organization (SRO): A self-regulatory organization (SRO) is a non-governmental organization that has the power to create and enforce industry regulations and standards, often in a specific sector or industry.

Broker-Dealer: A broker-dealer is a firm or individual that engages in the business of buying and selling securities on behalf of its customers (broker function) and for its own account (dealer function).

Securities Regulation: Securities regulation refers to the laws, rules, and regulations that govern the issuance and trading of securities in the financial markets, with the goal of protecting investors and maintaining fair and efficient markets.