Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority is a private American corporation that acts as a self-regulatory organization that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Association of Securities Dealers, Inc. as well as to the member regulation, enforcement, and arbitration operations of the New York Stock Exchange.
The United States Securities and Exchange Commission is the federal government agency that serves as the ultimate regulator of the United States securities industry, including oversight of FINRA.
Overview
The Financial Industry Regulatory Authority is the largest independent regulator for all securities firms doing business in the United States. FINRA's mission is to protect investors by making sure the United States securities industry operates fairly and honestly. As of October 2023, FINRA oversaw 3,394 brokerage firms, 149,887 branch offices and approximately 612,457 registered securities representatives.FINRA has approximately 4,200 employees and operates from Washington, D.C., and New York City, with 20 regional offices around the United States.
FINRA offers regulatory oversight over all securities firms that do business with the public, plus those offering professional training, testing, and licensing of registered persons, arbitration and mediation, market regulation by contract for the New York Stock Exchange, the NASDAQ Stock Market, Inc., the American Stock Exchange LLC, and the International Securities Exchange, LLC; and industry utilities, such as Trade Reporting Facilities and other over-the-counter operations.
FINRA was formed by a consolidation of the member regulation, enforcement, and arbitration operations of the New York Stock Exchange, NYSE Regulation, Inc., and NASD. The merger was approved by the United States Securities and Exchange Commission on July 26, 2007.
FINRA's authority was upheld in June 2025, when the United States Supreme Court declined to hear an argument that the regulator is unconstitutional. The case was raised after FINRA made a 2019 judgement against a broker-dealer for alleged theft of client funds, and the appeals process resulted in the denial from the high court and upholding of FINRA's regulatory authority.
Congresswoman and Republican Conference Chair Lisa McClain introduced legislation in the 119th Congress to transfer the rulemaking, examination, and enforcement authority held by FINRA to the Securities and Exchange Commission.
History
The NASD was founded on September 3, 1936 as Investment Bankers Conference, Inc. and, on August 7, 1939, was registered under the name National Association of Securities Dealers, Inc. as a national securities association with the SEC under authority granted by the 1938 Maloney Act amendments to the Securities Exchange Act of 1934, which allowed it to supervise the conduct of its members subject to the oversight of the SEC. In 1971, NASD launched a new computerized stock trading system called the National Association of Securities Dealers Automated Quotations stock market. The NASDAQ and AMEX stock exchanges merged in 1998. Two years later, the NASDAQ underwent a major recapitalization and became an independent entity from NASD. In July 2007, the SEC approved the formation of a new SRO to be a successor to NASD. The NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange were then consolidated into the Financial Industry Regulatory Authority.Board of governors
FINRA’s Board comprises 22 industry and public members, with 10 seats designated for industry members, 11 seats designated for public members and one seat reserved for FINRA’s Chief Executive Officer. The FINRA By-Laws provide that the number of public governors shall exceed the number of Industry governors. The small firm governors, mid-size firm governor, and large-firm governors are elected by members of FINRA according to their classification as a small firm, mid-size firm, or large firm.Regulation and licensure functions
FINRA regulates trading in equities, corporate bonds, securities futures, and options. All firms dealing in securities that are not regulated by another SRO, such as by the Municipal Securities Rulemaking Board, are required to be member firms of the FINRA.As part of its regulatory authority, FINRA periodically conducts regulatory exams of its regulated institutions. FINRA publishes an annual report detailing its observations from the prior year's examinations in order to provide member firms with insight into findings from the recent oversight activities of FINRA’s Member Supervision, Market Regulation and Enforcement programs. Topics covered in the 2023 report include manipulative trading, fixed income — fair pricing, fractional shares and Regulation SHO, financial crimes, cybersecurity, complex products, Regulation Best Interest and Form CRS and mobile apps.
FINRA licenses individuals and admits firms to the industry, writes rules to govern their behavior, examines them for regulatory compliance, and is sanctioned by the U.S. Securities and Exchange Commission to discipline registered representatives and member firms that fail to comply with federal securities laws and FINRA's rules and regulations. It provides education and qualification examinations to industry professionals. It also sells outsourced regulatory products and services to a number of stock markets and exchanges; e.g. American Stock Exchange and the International Securities Exchange.
NASD, the predecessor of FINRA, founded the NASDAQ stock market in 1971. In 2006, NASD demutualized from NASDAQ by selling its ownership interest.
The NASD, later FINRA, publishes much educational information for the public and has been publishing and disclosing the education and exam requirements for USA based credentials, charters, designations and certifications that are offered by SROs for about a decade. In 2003, FINRA established an Investor Education Foundation focused on providing underserved Americans with financial decision-making tools and education, as well as funding research into financial education and protection for American households.
BrokerCheck
FINRA publishes the background and experience of all licensed financial brokers, advisors and firms for free through the BrokerCheck website. The BrokerCheck Report for an individual contains:- A summary section that provides a brief overview of the investment professional and credentials.
- A list of registered securities firms where the individual is currently and/or was previously registered. The individual’s employment history for the last 10 years
- A qualifications section that includes a listing of the individual’s current registrations or licenses, if any, and industry exams they have passed.
- A disclosure section that includes information about customer disputes, disciplinary events and certain criminal and financial matters on the individual’s record
- The individual’s most recently submitted comment
- A summary section that provides a brief overview of the firm and its background.
- A firm profile that describes where and when the firm was established and lists the people and organizations that own controlling shares or directly influence the firm's daily operations.
- A firm history that details any mergers, acquisitions or name changes affecting the firm.
- A firm operations section that lists the firm's active licenses and registrations, the types of businesses it conducts and other details pertaining to its operations.
- A disclosures section that contains information about any arbitration awards, disciplinary events and financial matters on the firm's record. Some of these items may involve pending actions or allegations that have not been resolved or proven.
- the subject of a final regulatory action;
- convicted of or pled guilty or no contest to certain crimes;
- subject to a civil injunction involving investment-related activity or found in a civil court to have been involved in a violation of investment-related statutes or regulations;
- or named as a respondent or defendant in an arbitration or civil litigation in which the investment professional was alleged to have committed a sales practice violation, and which resulted in an award or civil judgment against the investment professional.