The Financial Industry Regulatory Authority (FINRA) is charged with the responsibility of monitoring and overseeing the function of brokers and securities firms within the United States. With authority granted by Congress, FINRA accomplishes this oversight by establishing regulations that apply to different sectors of the financial industry. That includes the securities industry.
The goal of the regulation and accompanying oversight is to promote integrity and honesty with the financial community. Doing so makes it harder for those with less than honorable intentions to abuse the trust placed in them by investors. When and as FINRA identifies a possible breach of established laws and regulations, legal action is likely to ensue.
The body functions with the support of a Board of Governors. This Board is headed by a Chief Executive Officer proper and the Chief Executive Officer of NYSE Regulations. 11 are designated as Public Governors. There are also three governors representing small firms, one for mid-sized firms, and three for large firms. An independent dealer and a floor member governor round out the Board.
The Scope of FINRA
FINRA approaches the task of maintaining integrity in the financial industry in several ways. One has to do with monitoring activities in each of the financial markets. Anything that shows signs of being questionable practices or actions is monitored closely. If the evidence indicates fraudulent activity, steps are taken to stop the action and hold the responsible parties accountable.
Investor education is another function fulfilled by FINRA. Resources are provided for investors who are just beginning to build portfolios, those who are interested in learning more about different markets, and even seasoned investors. The idea is that more informed investors are less likely to be taken in by some type of financial scam. They will also be more adept at spotting questionable practices and reporting them if necessary.
Compliance and the enforcement of current regulations is also part of what FINRA does. Brokers agree to abide by those regulations, as well as any type of investment firm. If a firm or an independent broker fails to do so, FINRA has the authority to take action. When investors file claims, FINRA investigates those claims and imposes disciplinary measures if the findings indicate action is warranted.
While education, monitoring, and enforcing current regulations are all part of FINRA’s work, crafting new rules related to the securities industry is also an integral function. The scope of those new rules impact investors, member brokers, investment firms, and even the Securities and Exchange Commission. New rules are typically drafted when and as needed, and must be reviewed by FINRA committees to ensure they are not in conflict with other regulations. Once the FINRA committee reviews are completed, the proposed rules are submitted to the SEC for further review and possible implementation.
Arbitration is also one of the ways FINRA carries out its responsibilities. The arbitration may be between investment firms and their employees, investors and brokers, or between investors and investment firms. Arbitration does not eliminate the right of either party to file class action suits if desired.
With 20 regional offices and official headquarters in Washington, DC and New York City, FINRA seeks to prevent corruption of the investment process. Parties who are facing charges of misconduct can seek help from a FINRA regulatory defense attorney. The firm of Farar & Lewis LLP stands ready to provide that defense.