The Financial Industry Regulatory Authority, FINRA, protects U.S. investors by making sure that the entire American securities industry functions honestly and fairly. This is an enormous undertaking. The authority oversees all of the securities firms conducting business in the United States, and presides over all of the dealings that take place between traders, brokers, and investors.
FINRA is a relatively new player in the oversight game. It emerged in 2007 from the combination of two other ruling bodies: the NYSE regulatory committee and the National Association of Securities Dealers (NASD). Their mandate: “To detect and prevent wrongdoing in the U.S. markets.”
A Very Big Job
As of 2016, FINRA oversees 3,941 securities firms and the more than 640,000 brokers who work for them.
As of 2016, FINRA manages up to 75 billion transactions every single day, and as a result paints a clear picture of the U.S. financial markets. With its 25 comprehensive oversight, the agency doesn’t miss a thing. In fact, thanks to their dedicated vigilance during 2015, FINRA:
- Initiated 1,512 disciplinary actions against investment firms and brokers
- Imposed $95.1 million in fines
- Sent more than 800 insider trading and fraud cases up to the SEC (the U.S. Securities and Exchange Commission)
- Returned $96.6 million of compensation to defrauded investors
While it may seem like FINRA and the SEC do the same thing, they don’t. The SEC strives to ensure fairness for individual investors; FINRA oversees brokerage firms and stockbrokers, regulating the industry. Each agency works from a different angle to keep the markets honest. At the end of the day, though, the SEC also oversees FINRA.
The Scam Meter
Not sure if an investment is too good to be true? Test it out on FINRA's Scam Meter (http://apps.finra.org/meters/l/scammeter.aspx), an online tool that helps investors avoid fraudulent investments. By answering just four questions, you'll learn whether the prospect is on the up-and-up or a fraudulent scheme.
