FINRA — the Financial Industry Regulatory Authority — is the self-regulatory organization that oversees U.S. broker-dealers and their registered representatives. Operating under SEC supervision, FINRA writes and enforces the sales-practice rules, administers licensing exams, and runs the arbitration forum through which most customer disputes are resolved.
What FINRA does
FINRA is not a government agency; it’s an industry-funded regulator with government-backed authority, created in 2007 from the merger of the NASD and NYSE regulation. Every broker-dealer distributing securities to the public must be a member, and every representative must pass FINRA-administered exams — the SIE plus a representative-level exam such as the Series 7, with the Series 63/65/66 covering state and advisory law. FINRA examines firms, brings enforcement actions (fines, suspensions, bars, and the sanctions published in its disciplinary actions), and maintains BrokerCheck, the free public database of firms’ and brokers’ licensing, employment, and disciplinary history — a first-stop diligence tool for anyone checking out a salesperson or firm.
For the alternatives market specifically, FINRA’s rulebook shapes distribution. Rule 2111 (suitability) and, for retail recommendations, the SEC’s Reg BI set the recommendation standards; Rule 2310 governs direct participation programs and unlisted REITs, capping underwriting compensation and imposing heightened diligence; and communications rules govern how sponsors and firms may market illiquid products. When a non-traded product’s paperwork feels heavier than a mutual fund’s, FINRA rules are usually the reason.
FINRA vs. the SEC — and who it doesn't cover
The SEC is the federal regulator of the entire securities market; FINRA is the front-line supervisor of broker-dealers specifically, with the SEC overseeing FINRA itself. Importantly, FINRA does not regulate registered investment advisors — RIAs answer to the SEC or state regulators — so a client’s protections and dispute forums differ depending on whether they’re dealing with a brokerage representative or an advisory firm, one of the practical reasons the BD/RIA distinction matters.
FAQ
What is FINRA in simple terms?
The industry’s own regulator for brokerage firms — it licenses brokers, writes the sales rules, inspects firms, disciplines violations, and runs the arbitration system, all under SEC oversight.
Is FINRA a government agency?
No — it’s a self-regulatory organization funded by member firms, supervised by the SEC. Its rules carry regulatory force for member firms.
What is BrokerCheck?
FINRA’s free public database showing any broker’s or firm’s registrations, employment history, and disciplinary record — worth checking before working with any brokerage representative.
Related terms
Broker-Dealer · SEC · Regulation Best Interest · Suitability · Direct Participation Program (DPP)
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