Five Steps to Protecting Market Integrity
FINRA's mission is to safeguard the investing public against fraud and bad practices. We pursue that mission in five important ways to enable a fair, balanced, inclusive market where everyone can invest with confidence:
1. Deter misconduct by enforcing the rules
We write and enforce rules and regulations for every single brokerage firm and broker in the United States. That includes requiring that all brokers be licensed and registered by FINRA, pass our qualification exams and satisfy continuing education requirements.
We make sure broker-dealers comply with our own rules, federal securities laws and the rules of the Municipal Securities Rulemaking Board. Hundreds of professionally trained FINRA financial examiners are in the field every day, taking a close look at the way brokers operate, with a focus on the greatest risks to the markets and investors. We conduct routine examinations, as well as inquiries based on investor complaints and suspicious activity.
We also review all broker advertisements, websites, sales brochures and other communications to make sure brokers present information in a fair and balanced manner. Every year, FINRA reviews about 100,000 individual advertisements and communications from firms to investors.
2. Detect and prevent wrongdoing in the U.S. markets
FINRA uses technology powerful enough to look across markets and detect potential abuses. Using a variety of data-gathering techniques, we work to detect insider trading and any strategies firms or individuals use to gain an unfair advantage.
FINRA processes, on average, 37 billion—and up to 75 billion—transactions every day to build a complete, holistic picture of market trading in the United States.
We also work behind the scenes to detect and fight fraud. When we share information with other regulators, it leads to important actions that prevent further harm to investors.
3. Discipline those who break the rules
We have the experts, technology and authority to respond quickly to wrongdoing. If brokers break the rules, we can fine, suspend or bar them from the industry.
Through our aggressive vigilance, in 2017, we:
- Fined a firm $950,000 for failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer’s variable annuity account. The firm repeatedly failed to adequately investigate “red flags” that a former registered sales assistant and since-convicted felon was transferring money from the customer’s variable annuity account to a third-party bank account in his wife’s maiden name.
- Expelled another firm from FINRA membership for charging customers unfair and unreasonable prices and excessive markups. FINRA also fined it $1 million and ordered the firm to disperse nearly $333,000, plus interest. The broker-dealer bought and sold corporate bonds from other broker-dealers to sell to its retail customers, charging them markups on the bonds. The firm also bought bonds from its retail customers and sold them to other broker-dealers, charging the customers markdowns. FINRA found that the charges were not fair or reasonably related to the then-current market price of the security.
4. Educate and inform investors
We believe an essential component of investor protection is education. We provide investors with tools and resources that can help them make wise financial decisions.
Through the FINRA Investor Education Foundation, we equip underserved audiences nationwide with resources needed for financial success and teach investors to protect themselves from financial fraud. Our website offers dozens of free resources about investing and avoiding fraud, including online calculators and investor alerts. See our For Investors page.
5. Resolve securities disputes
When problems between brokers and investors occur, we administer the largest forum specifically designed to resolve securities-related disputes between and among investors, securities firms and individual brokers.
Our dispute resolution forum is the largest in the country for the securities industry, handling nearly 100 percent of securities-related arbitrations and mediations from 69 hearing locations—including at least one in all 50 states, and Puerto Rico.