The Financial Industry Regulatory Authority is a non-profit organization authorized by the government. Its purpose is to ensure the integrity of the market and provide basic protection to investors. It is a self-regulatory organization operating under the supervision of the Securities and Exchange Commission.
To enable an inclusive and fair market and safeguard against bad practices such as fraud, FINRA takes multiple steps.
1. Write and enforce rules
FINRA regulates investment firms and brokers by setting rules for their conduct. These rules define and prohibit bad practices that can hurt investors. Leveraging the power of technology, FINRA can detect breaches of its regulations quickly and impose penalties, such as fines, on the responsible parties. It also responds to complaints by investors. Through strict enforcement of the rules against misconduct by investment brokers and securities firms, FINRA hopes to deter future violations.
2. Resolve disputes
Disputes can arise between individual brokers or securities firms and the investors that they serve. Through its dispute resolution forum, FINRA handles almost all mediations and arbitrations related to securities with the goal of resolving the disputes.
3. License brokers
Qualification exams identify brokers qualified for registration with and licensing by FINRA. To maintain a license, brokers must also go through FINRA’s continuing education process and satisfy applicable requirements. Brokers who do not satisfy FINRA’s requirements cannot legally sell securities products to investors.
4. Educate investors
While FINRA works diligently to protect investors from bad practices by brokers and security firms, investors educated in avoiding fraud are better able to protect themselves by making wise financial decisions. FINRA offers tools and resources to teach investors how to avoid financial fraud, many of which are free and created specifically to address underserved audiences.