Financial Industry Regulatory Authority - FINRA

What is the 'Financial Industry Regulatory Authority - FINRA'

The Financial Industry Regulatory Authority (FINRA) resulted from the merger of the New York Stock Exchange’s regulatory committee and the National Association of Securities Dealers. FINRA, as a regulatory body, is tasked with governing all business dealings conducted between dealers, brokers and all public investors. The consolidation of these two regulators aims into FINRA aims to do away with overlapping regulation and inefficient costs. At its origin, FINRA was known as SIRA, the Securities Industry Regulatory Authority, but there were numerous complaints because the name carried a strong similarity to the Arabic term "Sirah," a term used for biographical texts about the life of Muhammad.

BREAKING DOWN 'Financial Industry Regulatory Authority - FINRA'

FINRA is the single largest independent regulatory body for securities firms operating in the United States. While FINRA’s overriding task is to protect investors by ensuring that the U.S. securities industry operates in an honest and fair manner, FINRA must deal with thousands of smaller tasks on a regular basis in order to make this happen.

The History of FINRA

The National Association of Regulatory Authority (NASD) began in 1939 and was registered with the Securities Exchange Commission (SEC). NASD launched the NASDAQ stock market in 1971. It underwent a major recapitalization in 2000 and became independent from NASD. Seven years later, the SEC approved the formation of FINRA, in 2007.

More About FINRA

While the numbers change fairly frequently, FINRA oversees more than 4,500 brokerage firms, approximately 160,000 branch offices and more than half a million registered securities representatives, as of 2016.

FINRA operates from headquarters in Washington, D.C. and New York City and from 20 regional offices throughout the United States. In addition to overseeing all securities firms, FINRA oversees all firms that offer professional training, testing and licensing of registered brokers. It also is in charge of monitoring arbitration and market regulation by contract for the New York Stock Exchange (NYSE), the NASDAQ stock market, the American Stock Exchange LLC and the International Securities Exchange LLC. FINRA provides regulatory oversight to industry utilities, such as trade reporting facilities and over-the-counter (OTC) operations.

Recent Happenings

FINRA, as part of its duties, conducts regulatory exams of regulated institutions on a periodic basis. It released its 2015 annual Regulatory and Examinations Priorities Letter, which holds sway over broker-dealers and their affiliated banks and insurance companies. In this letter, FINRA identified areas of concern and focus that include variable annuities and elements of sales practices that must be reviewed and potentially revised. FINRA's 2016 letter, released in January 2016, indicated that these areas were still of concern and also indicated renewed concern over interest rate-sensitive products in light of recently increased interest rates.

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