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.