IMSA & FINRA

FINRA – Financial Industry Regulatory Authority

Every investor in America relies on one thing: fair financial markets. That is why FINRA works every day to ensure that:

•  Every investor receives the basic protections they deserve
•  Anyone who sells a securities product has been tested, qualified and licensed
•  Every securities product advertisement used is truthful, and not misleading
•  Any securities product sold to an investor is suitable for that investor's needs
•  Investors receive complete disclosure about the investment product before purchase

To accomplish our dual mission of investor protection and market integrity, FINRA performs the following activities every day:

1. Deter misconduct by enforcing the rules

FINRA's mission is to safeguard the investing public against fraud and bad practices. We pursue that mission by writing and enforcing rules and regulations for every single brokerage firm and broker in the United States, and by examining broker-dealers for compliance with our own rules, federal securities laws and rules of the Municipal Securities Rulemaking Board.

All brokers must be licensed and registered by FINRA, pass our qualification exams and satisfy continuing education requirements.

Every day, hundreds of professionally trained FINRA financial examiners are in the field 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. And we 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. 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 brought 1,369 disciplinary actions against registered individuals and firms, levied fines totaling $64.9 million and ordered restitution of $66.8 million to harmed investors.

•  FINRA charged a broker with securities fraud for churning the account of a 77-year old blind widow, and for excessive and unsuitable trading in her account. Within a few weeks after the customer’s husband passed away, the broker began aggressively trading her accounts to generate excessive commissions for himself. Because she was blind and severely debilitated, requiring in-home care, the customer relied completely on her broker to accurately portray her account activity and let her know about account performance. The broker placed more than 700 trades in more than 200 different securities, which generated more than $243,000 in commissions, while causing the customer approximately $184,000 in net losses.
•  In another case, FINRA 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.
•  After finding that a firm charged customers unfair and unreasonable prices and excessive markups, FINRA expelled the firm from FINRA membership, fined it $1 million and ordered the firm to disgorge 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.

3. 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.

In fact, 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. In addition to our own enforcement actions, in 2016, we referred more than 785 fraud and insider trading cases to the SEC and other agencies. When we share information with other regulators, it leads to important actions that prevent further harm to investors.

4. Educate and inform investors

We believe an essential component to investor protection is investor 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, FINRA.org, offers dozens of free resources about investing and avoiding fraud, including online calculators and investor alerts.

•  FINRA's BrokerCheck allows investors to research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers, as well as investment adviser firms and representatives
•  Our Market Data Center provides investors with a wealth of information on a variety of financial instruments, including data on bond market activity from FINRA's Trade Reporting and Compliance Engine (TRACE).
•  FINRA provides an easy-to-use, online Fund Analyzer that allows investors to compare expenses among funds—or among different share classes of the same fund.
•  Our Risk Meter allows investors to determine if they share characteristics and behavior traits that have been shown to make some investors vulnerable to investment fraud.
•  And by asking just four questions, our Scam Meter can help investors assess whether an investment opportunity is too good to be true.

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 more than 70 hearing locations—including at least one in all 50 states, London and Puerto Rico.