The federal government has a significant interest in safeguarding investors. In the wake of the great market crash that ignited the Great Depression, the U.S. government created the Securities and Exchange Commission (SEC) in order to better ensure that the markets remain free of unlawful manipulation. The SEC is an independent agency, which is a similar yet distinct classification from another key player in the securities regulation “business.”
The Financial Industry Regulatory Agency (FINRA) is not an independent agency of the government, even though it operates under the SEC. It is, instead, classified as a self-regulatory, government-authorized, non-profit organization. While the SEC is primarily concerned with enforcing market manipulation laws, FINRA broadly regulates securities markets, including brokerage firms, exchange markets and broker-dealers.
What exactly does FINRA do?
The broader mission of FINRA is to ensure that investors can participate in securities markets with greater confidence. In pursuit of that aim, FINRA attempts to safeguard investor protections, maintain high standards for qualifications and licensing required for those who sell securities and enforce investment disclosure policies.
Additionally, FINRA helps to ensure that advertising for securities is a truthful endeavor and that securities products don’t take advantage of investors. With that said, regulating the integrity of billions of events that occur in the markets daily – in addition to more than 624,000 brokers nationwide – is not an easy undertaking either. FINRA readily admits that it utilizes AI and “machine learning technologies” to foster its operations.
No technology is error-free and no organization that has such broad authority is going to execute its mission perfectly at all times. As a result, those who may be negatively affected by a misstep or misunderstanding involving FINRA can generally benefit from seeking legal guidance in order to clear up their circumstances as favorably as possible.
