If you, or your client, is in the financial industry, you will need to be aware of the Financial Industry Regulatory Authority (“FINRA”). FINRA is a government authorized organization created to oversee U.S. broker-dealers, to promote a fair financial market. And, after all, isn’t that what every investor relies on?
What Does FINRA Do?
FINRA creates and enforces rules which govern the ethics and activities of all registered broker-dealer firms and registered brokers in the United States. This includes examining firms for compliance, educating investors on compliance, and enforcing market transparency. The purpose of FINRA is to protect investors from fraud and bad faith actions.
In fact, in 2019 (the most recent statistics listed by FINRA), FINRA brought 854 disciplinary actions against brokers and firms for unethical behavior, levied $39.5 million in fines, ordered $27.9 million in restitution to investors, and referred 800+ cases of fraud and insider trading to the Securities and Exchange Commission.
Who is Behind FINRA?
FINRA is managed by 22 industry and public members– 10 of the seats are for industry members, 11 seats are for the public, and the final seat is reserved for the Chief Executive Officer. Collectively, they are known as the Board of Governors. Governors are elected for three-year terms, and are limited to two consecutive terms.
You might be thinking, great, another organization funded by taxpayer dollars. Wrong! FINRA is entirely funded by member firm fees, no tax dollars at pay here! Of course, there are also fines from non-compliance that come into play. In 2020, FINRA had a projected operating revenue of $868.9 million, with anticipated capital initiative spending of $74.6 million.
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This article is based on the law as of the date posted at the top of the article. This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.