What is FINRA?

Investors in the United States are protected by a number of regulatory bodies, including the Securities Exchange Commission, state regulatory divisions, and the Financial Industry Regulatory Authority (FINRA). FINRA is not a government institution, but rather an independent and not-for-profit entity operating with a Congressional mandate to ensure American investors are treated fairly and ethically.

According to its own published materials, FINRA takes four primary approaches to investor protection:

  1. Writing and enforcing regulations and rules for securities firms and brokers across the US;
  2. Investigating firms to ensure compliance with FINRA rules;
  3. Working to maximize market transparency;
  4. Providing educational materials for investors.

FINRA, which operates in seventeen offices across the country to supervise approximately 643,298 registered brokers, works to ensure that financial professionals only sell securities that have been tested, qualified, and licensed. It monitors securities advertisements for truthfulness and accuracy, and supervises both firms and individual brokers to guarantee that every security sold is suitable for the investor who purchases it. FINRA additionally requires securities professionals to fully disclose all material facts pertaining to the products they sell before the investor makes a transaction.

In 2014 alone, FINRA referred over 700 fraud cases for prosecution by the SEC and other agencies, made $1,397 disciplinary actions against brokers and firms, and levied $166.3 million in fines and restitution. The organization processes an approximate average of $40 billion in transactions every day, though that number reaches as high as $75 million.

To transact securities business in the US, brokers must be licensed through and registered by FINRA, pass numerous qualifying exams, and satisfy regular continuing education requirements. FINRA manages hundreds of field examiners who conduct regular investigations of brokers and firms, identifying red flags and looking into suspicious activity. The organization uses advanced technology and other techniques to scour the market each day for potential insider trading or other unfair tactics used by brokers and firms.

FINRA offers multiple free resources for investors to stay informed and avoid fraudulent activities. BrokerCheck gives investors access to background information, including disciplinary activity, of brokers, advisers, and firms; the Market Data Center contains data about numerous market instruments and products; the Fund Analyzer helps investors expenses among various funds; the Risk Meter helps investors determine whether they are vulnerable to fraud; and the Scam Meter allows investors to easily identify potential fraud.

Finally, and perhaps most importantly, FINRA administers dispute resolution processes for investors who believe they are victims of fraud. Most securities complaints are resolved not in court but in binding arbitration before a FINRA panel. However, investors should be sure to seek out the counsel of an experienced securities attorney to determine whether FINRA arbitration can help them recover lost funds.

If you or someone you know lost money investing with a stock broker or investment adviser, you may be able to recoup your losses. Call the securities and investment fraud law firm Fitapelli Kurta at (877) 238-4175 for a free consultation. Fitapelli Kurta takes every case on a contingency basis, which means Fitapelli Kurta only gets paid if and when you collect money. By law there may be a limited window to file your claim, so we recommend you avoid delay. Call (877) 238-4175 now to speak to an attorney for free.