FINRA is a self regulatory organization for member broker dealers in the United States. It is a private and not for profit membership organization under SEC supervision. Its Enforcement department investigates violations and can seek fines and suspensions and bars and restitution. Cases end in a settlement or a hearing.
Brokers and investors both ask who watches broker dealers and what happens after a rule violation. FINRA describes both on its own site.
Facts follow the FINRA pages About FINRA and Enforcement.
What is FINRA?
FINRA states it is a self regulatory organization for member broker dealers. It is a private and not for profit membership organization registered with the SEC and working under SEC supervision. FINRA states it is not part of the government.
Its stated mission is to protect investors and safeguard the integrity of United States capital markets. Member fees fund the organization and not taxpayer dollars.
What are the Activities of FINRA?
- Creates and enforces rules for member firms and their representatives.
- Examines firms and monitors market activity.
- Returns money to harmed customers.
- Administers qualification exams and operates trade reporting facilities.
- Operates a dispute resolution forum.
How does FINRA Enforcement Work?
Enforcement staff investigate potential violations of FINRA and MSRB rules and federal securities laws. It brings formal disciplinary actions against firms and their associated persons when warranted. Investigations remain confidential as a matter of policy.
Cases can start from surveillance reports and exam findings and customer complaints and tips and referrals and press reports.
| Outcome | Meaning |
|---|---|
| Settlement | The respondent resolves the case early through a Letter of Acceptance, Waiver and Consent |
| Hearing | FINRA files a complaint and its Office of Hearing Officers issues a decision |
| Cautionary Action | Informal step for minor violations with no customer harm and not formal discipline |
| No action | Enforcement closes the matter |
Which Sanctions can FINRA Seek?
- Fines.
- Suspensions.
- Bars. Bars permanently prohibit association with any FINRA member in any capacity and is reserved for serious misconduct.
- Restitution. FINRA seeks restitution for harmed customers whenever possible.
For other compliance topics see PCI DSS compliance and HIPAA compliance and the DPO role under GDPR.
Frequently Asked Questions
What does FINRA Mean?
It stands for Financial Industry Regulatory Authority.
Is FINRA a Government Agency?
No. FINRA states it is a private not for profit organization and not part of the government. It works under SEC supervision.
Who does FINRA Oversee?
It oversees its member broker dealers and their representatives.
What Sanctions can FINRA Seek?
Fines and suspensions and bars and restitution for harmed customers.
How do FINRA Cases End?
Most paths are a settlement through an AWC or a contested hearing. Staff may also close a matter or issue a Cautionary Action.
Key Takeaways
- FINRA is a self regulatory organization for broker dealers.
- It is private and works under SEC supervision.
- Enforcement investigates violations and brings disciplinary actions.
- Sanctions include fines and suspensions and bars and restitution.
- Settlement through an AWC is one way a case ends.
Sources and References
Facts follow FINRA pages. This guide is general information and not legal advice.
- About FINRA (FINRA) www.finra.org
- Enforcement (FINRA) www.finra.org