Complying with all FINRA rules can be a challenge. Understanding the organization and its regulations can make it easier for firms to comply with confidence.
To meet FINRA compliance requirements, it’s important to know what FINRA is, what the organization oversees, and how firms are impacted if they don’t follow the FINRA’s guidelines and regulations. Having the proper compliance software in place can help monitor transactions and reduce time-consuming manual tasks that are prone to human error. But first, there are a few things firms can do to get on the right track.
WHAT IS FINRA?
The Financial Industry Regulatory Authority (FINRA) is a United States non-governmental organization created to help regulate and protect the financial industry. FINRA is authorized by Congress and overseen by the Securities Exchange Commission (SEC).
FINRA has a multitude of responsibilities to keep financial markets fair and standards high, including:
- Monitoring and regulating stockbrokers
- Issuing licenses to brokers and firms
- Developing and helping to enforce SEC regulations
- Ensuring transparency in industry transactions
- Ensuring that financial data is kept secure
- Conducting compliance training and exams for members
- Investigating complaints and suspicious activity
FINRA monitors over 4,200 brokerage firms — processing up to 75 billion transactions per day — and assesses all web content, printed material, and communications to ensure clarity and transparency for investors.
FINRA COMPLIANCE REQUIREMENTS
FINRA develops mandatory rules and regulations that apply to all brokers and brokerage firms, such as:
- Brokers must be licensed and registered.
- Brokers must have passed their examinations, have the right qualifications, and satisfy all continuing education requirements.
Professionally trained financial examiners monitor brokers and firms to ensure compliance with these rules. If any firms are found to be in violation of any FINRA or SEC regulations, they must undergo in-depth investigations and could face disciplinary action.
FINRA non-compliance penalties include:
- Substantial fines
- Suspensions or permanent dismissals and blacklisting
- Federal government investigations
Taking this approach helps to deter misconduct and ensures integrity at all levels.
HOW TO ENSURE FINRA COMPLIANCE IN 2023
FINRA compliance regulations are outlined in the Report on FINRA’s Risk Monitoring and Examination Activities (The Report). This report summarizes noteworthy findings from recent examinations, outlines effective practices, and identifies considerations and resources for member firm compliance programs. These issues are then grouped into four categories:
- Firm Operations
- Market Integrity
- Communications and Sales
- Financial Management
Understanding and staying up to date with FINRA’s extensive requirements can be a challenge, since they cover so many areas and types of regulatory compliance. To ensure FINRA compliance in 2023, there are a few things your firm can do:
Use a third-party service to help strengthen your compliance programs and software
Update your compliance software to an automated program to save time and reduce human error
Asses whether it is better to build or buy an automated compliance tool
No matter what your firm decides to do, taking a comprehensive, future-ready approach to compliance will help to reduce errors and promote integrity among your teams. Consider implementing automated FINRA compliance tools to stay current and support your business’ continued success.