FINRA Business Model and Business Segment Definitions
This FINRA member firm (“firm”) Business Model and Business Segment1 definition resource provides firms with greater transparency into FINRA’s Risk Monitoring program. FINRA is sharing these definitions to provide a foundational understanding of how FINRA classifies firms, particularly as FINRA plans to share business model- and business segment-specific resources in the future.
Click on each business model below to view more details and related business segments.
Please note: Generally, FINRA assigns firms to the business segment that best reflects the firm’s primary business. However, in some instances, FINRA considers affiliated firms to be materially interconnected and, as a result, treat them as a “household,” in which case, all firms are assigned to the business segment of the primary entity.
Capital Markets and Investment Banking Services
Firms that primarily engage in activities such as structuring, advising on mergers and acquisitions, underwritings, advisory services, sales of private placement offerings or private equity funds to institutions, product origination and wholesaling, or provide capital markets and investment banking services.
Business Segments | |
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| M&A and Investment Banking | Firms whose primary activities include advice pertaining to mergers and acquisitions. These firms may also advise clients on financial restructurings, valuation, hostile takeovers and takeover defense, leveraged buyouts, divestitures, IPOs, spinoffs, recapitalizations, capital structure and capital raising alternatives. This business segment also includes firms that primarily participate in underwritings of public offerings (excluding municipalities), as well as limited purpose members that operate pursuant to the Capital Acquisition Broker rulebook. |
| Product Originator and Wholesaler | Firms that primarily engage in creating and/or selling registered and unregistered products (e.g., private funds, variable annuities, mutual funds, real estate investment trusts, business development companies, exchange-traded funds) to other financial intermediaries (typically broker-dealers). |
| Public Finance | Firms that primarily engage in underwriting or advisory services to municipalities. These firms may also engage in other activities, such as secondary market trading of municipal securities. |
| Private Placements – Institutional Investors | Firms that primarily sell private placement offerings and/or private equity funds to institutional clients. This business segment also includes firms that engage in the following:
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| Niche/Other | Firms identified as capital markets and investment banking, but do not fit into one of the other business segments. This includes firms that provide bespoke range of financial services and activities. |
Carrying and/or Clearing
Firms that primarily engage in correspondent clearing, securities financing transactions or chaperoning activities for foreign entities pursuant to SEA Rule 15a-6, or provide other carrying and/or clearing services.
Business Segments | |
|---|---|
| Correspondent Clearing | Firms that primarily carry the accounts of, and provide clearing, settlement and custody services to, introducing broker-dealers and other financial institutions. |
| Securities Financing Book | Firms that primarily conduct reverse repurchase, and repurchase and/or stock borrow and loan business. |
| Chaperone – 15a-6 Firms | U.S. broker-dealers with primary operations involving agreements to chaperone specific activities of foreign broker-dealers to U.S. customers pursuant to an exemption from U.S. broker registration in SEA Rule 15a-6. |
| Niche/Other | Firms identified as clearing and/or carrying, but do not fit into one of the other business segments. This may include, among others, firms that primarily provide custodial services or outsourcing solutions, such as clearing and settlement, back-office administrative services or record keeping. |
Diversified
Firms that offer multiple services, across a range of business lines, such as investment banking, research, sales and trading, public finance, wealth management, asset management, prime brokerage, clearing, institutional and/or retail services. Firms in this category typically have three or more distinct business lines that each account for 10 percent or more of their gross revenue.
Business Segments | |
|---|---|
| Large Diversified | Firms that offer multiple services across a range of business lines and typically generate at least $5 billion in annual revenue and/or have at least $100 billion in assets. |
| Medium Diversified – Carrying/Clearing | Carrying or clearing firms that offer multiple services across a range of business lines and typically generate at least $50 million in annual revenue and/or have at least $100 million in assets. |
| Medium Diversified – Non-Carrying/Clearing | Non-carrying or clearing firms that offer multiple services across a range of business lines and typically generate at least $50 million in annual revenue and/or have at least $100 million in assets. |
| Small Diversified | Firms that offer multiple services across a range of business lines and typically generate less than $50 million in annual revenue and/or have less than $100 million in assets. |
Retail
Firms that primarily provide brokerage services or effect transactions on behalf of an individual customer or an account whose ultimate beneficial owner(s) would be deemed an individual investor. Firms with this business model include independent contractor firms, self-directed online firms, full-service retail firms, insurance-affiliated retail brokerage firms and bank-affiliated retail brokerage firms.
Business Segments | |
|---|---|
| Small | Firms with 150 or fewer registered representatives that provide a large variety of wealth management services and products to retail investors. |
| Mid-Size & Large | Firms with more than 150 registered representatives that provide a large variety of wealth management services and products to retail investors. |
| Public Pooled Investment Vehicles and Variable Products | Firms primarily selling variable life insurance, variable annuities, mutual funds, real estate investment trusts, business development companies and/or 529 plans directly to retail investors. These firms may be affiliates of insurance companies, mutual fund companies, banks, registered investment advisers or entities providing administration services to qualified and non-qualified plans. |
| Private Placements | Firms that primarily sell private placement offerings to retail investors. This business segment also includes firms that engage in the following activities:
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| FinTech | Digital-first broker-dealers that leverage emerging technologies to provide innovative investment solutions and services to digital-native and previously underserved investors in the U.S. and internationally. These broker-dealers prioritize and design their services to be delivered primarily through web-based and mobile channels or platforms, rather than traditional in-person or phone-based methods. While focusing primarily on self-directed investing, these firms employ distinctive customer engagement methods and operate across centralized and decentralized platforms, with movement toward 24/7 global market access. |
| Independent Contractor (Small) | Firms with 150 or fewer independent contractor registered representatives that provide a large variety of wealth management services and products to retail investors. |
| Independent Contractor (Mid-Size & Large) | Firms with more than 150 independent contractor registered representatives that provide a large variety of wealth management services and products to retail investors. |
| Carrying/Clearing | FINRA member firms that provide custody, settlement and clearing services primarily to retail investors, from self-directed traders to full-service broker-dealer clients. These firms hold customer securities and cash, process trades, maintain books and records, and handle regulatory reporting obligations. They support retail brokerage operations by managing post-trade processing, compliance and customer account administration across diverse investment products and account types. |
| Funding Portals | FINRA-registered digital intermediaries that operate online platforms connecting small businesses seeking capital with retail investors under Regulation Crowdfunding. These specialized firms democratize access to early-stage investment opportunities while operating under strict limitations—they cannot provide investment advice, recommend securities or handle investor funds. Instead, they facilitate informed investment decisions by providing educational resources and due diligence materials through web-based and mobile channels. |
Trading and Execution
Firms that primarily engage in executing trades on their own behalf or on behalf of institutional customers. These activities include proprietary trading, market making, floor brokerage, inter-dealer brokerage, institutional brokerage and/or ATS activities.
Business Segments | |
|---|---|
| Large Proprietary Trading and Market Making | Firms that include single- or multi-asset class market makers that primarily provide liquidity to the financial markets and/or proprietary trading firms where trading profits and losses is the primary component of its revenues. Firms in this business segment generally have heightened impact on the market, typically generate more than $200 million in annual revenue and/or have total assets of $750 million or greater. |
| Medium/Small Proprietary Trading and Market Making | Firms that include single or multi-asset class market makers that primarily provide liquidity to the financial markets and/or proprietary trading firms where trading profits and losses is the primary component of its revenues. Firms in this business segment typically generate less than $200 million in revenue and/or have total assets of less than $750 million. |
| Alternative Trading Systems and Electronic Communication Networks | Firms primarily engaged in the operation of an SEC-approved non-exchange to conduct trades, most prominently in equities, but may also include fixed income and other products, such as private placements, governments and financing activities. This business segment may also include operating electronic trading platforms through which the firm's institutional and broker-dealer clients can access the liquidity provided by other broker-dealers or institutional clients. |
| Institutional Brokerage | Firms primarily engaged in buying or selling to or from other broker-dealers or institutions on a commission basis, broker-to-broker transactions (interdealer brokers) where the broker-dealer acts in an agency capacity and/or providing research services to institutional customers. |
1 Business Model is revised terminology replacing the term “Firm Grouping” and Business Segment is revised terminology replacing the term “Firm Sub-Grouping.”