What is the 'Financial Industry Regulatory Authority (FINRA)'

The Financial Industry Regulatory Authority (FINRA) is a regulatory body charged with governing business between brokers, dealers and the investing public. FINRA's creation was the result of the merger of the New York Stock Exchange’s regulatory committee and the National Association of Securities Dealers. The consolidation of these two regulators into FINRA was meant to do away with overlapping or redundant regulation, and to reduce the cost and complexity of compliance. 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. One of FINRA's more well-known services is BrokerCheck, a searchable database of brokers, investment advisors and financial advisors, which includes certifications, education and enforcement actions. BrokerCheck is made possible by FINRA's Central Registration Depository (CRD), a database containing the records of all individuals and firms that are in the securities business in the United States.

Financial Industry Regulatory Authority Purview

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 regulates the trading of equities, corporate bonds, securities futures and options. Unless a firm is regulated by a different self-regulatory organization it is required to be a FINRA member firm.

FINRA operates from headquarters in Washington, D.C., and New York, and also from 20 regional offices around the country. 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.

Financial Industry Regulatory Authority History

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.

RELATED TERMS
  1. National Association of Securities ...

    The National Association of Securities Dealers (NASD) was a self-regulatory ...
  2. FINRA BrokerCheck

    FINRA BrokerCheck is a free, online tool that helps individuals ...
  3. Securities Industry Regulatory ...

    The Securities Industry Regulatory Authority (SIRA), now called ...
  4. NASD Rule 2790

    NASD Rule 2790, now FINRA Rule 5130, was enacted in March of ...
  5. Compliance Registered Options Principal ...

    The Compliance Registered Options Principal was a supervisory ...
  6. Series 6

    The Series 6 is a securities license entitling the holder to ...
Related Articles
  1. Insights

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  2. Financial Advisor

    Why Financial Advisor Background Checks Are Vital

    An alliance of public interest groups is pressuring FINRA to broaden its BrokerCheck tool.
  3. Financial Advisor

    Expect FINRA to Ask These Culture Questions

    This month, FINRA kicks off its culture examinations for brokerage firms. Here's how to cram for the test.
  4. Financial Advisor

    What Advisors Need to Know About Cross Selling

    FINRA is undergoing a review of the cross-selling activities of broker-dealers. Here is what the regulator is zeroing in on.
  5. Trading

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  6. Financial Advisor

    FINRA Rule 2273: Your Recruiting Questions Answered

    An in-depth look at and Q&A on FINRA's new recruiting practices rule, which goes into effect in November.
  7. Investing

    Resolving Disputes With Your Financial Advisor

    Before you blame your advisor for your losses, be sure you know your rights and responsibilities.
  8. Personal Finance

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  9. Tech

    Amazon, Google Lead Contenders for SEC’s Big Data Project

    Amazon and Google are the front-runners for SEC's ambitious cloud-hosting project called CAT, and the business opportunity is massive.
  10. Investing

    The Issuance Procedure of High-Yield Bonds

    The issuance of corporate high-yield bonds can have several advantages over equity. A closer look.
RELATED FAQS
  1. How does FINRA differ from the SEC?

    Discover how Securities and Exchange Commission (SEC) is different from the Financial Industry Regulatory Authority (FINRA) ... Read Answer >>
  2. How are asset management firms regulated?

    Find out how the asset management industry is regulated and how those regulations fit within the broader scope of financial ... Read Answer >>
  3. What possible past activities will prevent me from becoming a Registered Representative?

    There are several events that could either prevent a person from becoming a Registered Representative, or that will result ... Read Answer >>
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  3. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  4. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
Trading Center