Wednesday’s Word: FINRA

By Kelly Robinson, Fall 2015 Student Intern

FINRA stands for the Financial Industry Regulatory Authority, which is a self-regulatory organization in the United States. Their mission is to protect investors and market integrity through effective and efficient regulation of the securities industry.

FINRA came about in July of 2007, from the merger of the National Association of Securities Dealers, Inc. (NASD) and a division of the New York Stock Exchange (NYSE) which focused on member regulation, enforcement, and arbitration.

FINRA has several duties including writing and enforcing rules, examining securities firms for compliance with those rules and federal securities laws, registering and educating brokers, and performing market regulation for the major U.S. stock markets. FINRA requires all brokers to be licensed and registered by them, pass their qualification exams, and satisfy continuing education requirements to remain active. If a broker breaks any of the rules, FINRA can fine, suspend, or bar them from the industry. FINRA also handles any dispute between brokers, firms, and investors by using dispute resolution processes such as arbitration and mediation. In fact, FINRA handles close to 100% of securities-related arbitrations and mediations in the United States and has brought close to 1,400 disciplinary actions against registered individuals and firms and has ordered restitution of $32.3 million to harmed investors.

FINRA also provides education and tools for investors to help them make better financial decisions. Many of the tools and resources are available to investors for free online at FINRA.org and can help ensure investors know who they are dealing with and aren’t being scammed. Some of these tools are outlined below:

  • BrokerCheck allows investors to research current and former FINRA-registered brokers and advisors, as well as their firms. This tool will tell investors if brokers or representatives are currently registered, which qualifying exams they may have passed, and whether there have been any complaints again them or their firm.
  • Scam Meter is a quick questionnaire, consisting of four questions, to determine if an opportunity is “too good to be true.” The questionnaire asks you to describe the type of investment it is, how you heard about the opportunity, what you were told about the investment, and who is selling it. Based on the information it collects, the program will highlight red flags that you should pay attention to, before deciding to go forward with the opportunity.
  • Fund Analyzer is a tool investors can use to compare expenses on up to three mutual funds, exchange traded funds (ETFs), or exchange traded notes (ETNs) at once. The tool estimates the value of funds and impact of fees and expenses on the investment and gives the ability to look up applicable fees and available discounts for funds.

If you’d like to learn more about FINRA or check out some of their free investor education resources, click here.