Reference · Regulators
FINRA: Financial Industry Regulatory Authority
The self-regulatory organization overseeing U.S. broker-dealers.
FINRA (Financial Industry Regulatory Authority) is a non-governmental self-regulatory organization (SRO) that writes and enforces rules for U.S. broker-dealers under oversight of the Securities and Exchange Commission. Investors most often encounter FINRA through BrokerCheck, which provides registration and disciplinary history for brokers and firms, and through FINRA's market-transparency platforms for bond and OTC market data.
Direct Answer
FINRA is a self-regulatory organization overseeing U.S. broker-dealers under SEC oversight. Investors most often encounter FINRA through BrokerCheck (broker registration and disciplinary records), market transparency resources including TRACE bond data and OTC Bulletin Board data, examinations and registration for registered representatives, and investor education. FINRA is not a government agency and does not regulate investment advisers.
What FINRA regulates
FINRA's primary jurisdiction covers broker-dealers and their registered representatives. A broker-dealer is a firm or individual that buys and sells securities on behalf of customers (acting as a broker) or for its own account (acting as a dealer). When you open a brokerage account and place a trade, the firm executing that trade is almost certainly a FINRA member subject to its rules.
Registered representatives are the individuals who work at broker-dealers and interact directly with customers. Before anyone can legally sell securities to the public through a FINRA member firm, they must pass qualifying examinations, which FINRA administers. The most common is the Series 7 (General Securities Representative), though dozens of other licenses exist for specific products such as municipal securities, options, and commodities futures.
FINRA writes conduct rules governing how broker-dealers treat customers, including requirements around suitability of recommendations, disclosure of conflicts of interest, and supervision of registered representatives. It also operates a dispute resolution program handling arbitration and mediation between investors and broker-dealers. Firms that violate FINRA rules face enforcement actions including fines, suspensions, and bars from the industry.
The SRO model means that FINRA is funded and governed by the industry it regulates. Member firms pay fees based on their size and trading activity, and these fees fund FINRA's operations. The SEC oversees FINRA, approves its rules, and can review its disciplinary decisions. This structure requires FINRA to balance investor protection with the legitimate interests of its member firms, a balance that the SEC monitors through its oversight role.
What FINRA does not regulate
FINRA's jurisdiction ends at the broker-dealer boundary. Investment advisers, the other major category of investment professional, are regulated separately. Federally registered investment advisers (those managing $100 million or more in assets) are regulated by the SEC under the Investment Advisers Act of 1940. Smaller advisers are regulated by state securities authorities. FINRA has no authority over investment advisers, which matters because the difference in regulatory standards between brokers and advisers has long-standing implications for investor protection.
Commodities and derivatives markets are primarily the domain of the Commodity Futures Trading Commission (CFTC), with the National Futures Association (NFA) serving as the SRO for futures professionals. FINRA and the CFTC have some areas of overlapping concern for products such as securities futures, where they coordinate jurisdiction, but FINRA does not regulate stand-alone commodity pools, commodity trading advisers, or futures commission merchants.
Banks, including investment bank holding companies, are regulated by the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), depending on their charter and structure. FINRA may regulate a bank's broker-dealer subsidiary if that subsidiary is registered with FINRA, but FINRA has no authority over the banking activities of the parent institution.
The distinction between a broker and an investment adviser matters because they operate under different legal standards. A broker must recommend products that are suitable for a customer at the time of the recommendation (the suitability standard, now updated to a "Regulation Best Interest" framework). An investment adviser has a fiduciary duty to act in the client's best interest at all times. If you are uncertain whether your financial professional is a broker, an adviser, or both, BrokerCheck and the SEC's Investment Adviser Public Disclosure (IAPD) database together give a complete picture.
BrokerCheck: how to verify a broker
BrokerCheck at brokercheck.finra.org is a free public database of registered broker-dealers and their registered representatives. Before opening an account or following investment recommendations, investors should verify the registration status and disciplinary history of the person and firm they are working with.
To use BrokerCheck, search by the individual's name or their Central Registration Depository (CRD) number. Every registered person in the industry receives a unique CRD number when they first register. The report generated by BrokerCheck draws on the Form U4 (the registration form filed when a person registers with a firm) and Form U5 (filed when a person leaves a firm).
A BrokerCheck report shows current registration status and the jurisdictions where the individual is licensed, past employment history at registered firms, any regulatory actions taken by FINRA or state regulators, customer disputes that were arbitrated or resulted in settlements above a certain threshold, certain criminal disclosures, and financial disclosures such as bankruptcies or judgments. The report also shows which examinations the individual has passed.
A clean BrokerCheck report means no reported events in those categories. It does not mean no complaints were ever made. Some customer disputes are resolved before they reach a formal arbitration filing. A complaint that resulted in a settlement below the reportable threshold, or a complaint that was withdrawn before reaching a formal stage, may not appear in the record. A clean record is meaningful but should be understood as showing what was required to be reported, not a complete picture of every interaction.
When reviewing a report that does show events, read the full disclosure text rather than just the category. Regulatory actions vary in seriousness, from minor technical violations to fraud charges. Customer disputes show the amount claimed, the amount awarded or settled, and the product involved. A single dated disclosure with a detailed explanation differs significantly from a pattern of recurring disputes across multiple employers.
FINRA market transparency platforms
FINRA operates two major market transparency platforms that make transaction-level data available to the public: TRACE for the bond market and OTC Markets (in coordination with OTC Markets Group) for over-the-counter equities.
TRACE, the Trade Reporting and Compliance Engine, requires broker-dealers to report most secondary market bond transactions within 15 minutes of execution. FINRA then publishes this data publicly. Before TRACE was established in 2002, bond prices were not publicly disclosed, and retail investors had no reliable way to know whether the price they were quoted was competitive. TRACE data allows investors to look up recent transaction prices for a specific bond identified by its CUSIP number, compare bid and ask spreads across different dealers, and assess whether a quote they receive is in line with what other investors are actually paying.
For equity securities that trade over the counter rather than on a national exchange, FINRA operates the OTC Bulletin Board (OTCBB) data systems and publishes quote information through coordination with OTC Markets Group. These markets include smaller companies and foreign securities that do not meet the listing standards of major exchanges such as the NYSE or Nasdaq.
Investors using TRACE data should understand that the published prices are transaction prices, not current quotes. Bond markets are not continuous like equity markets, so the most recent TRACE transaction for a given bond may be hours or days old. For thinly traded bonds, the reported transaction may not reflect current market conditions. TRACE data is most useful for evaluating whether a price is reasonable relative to a population of recent trades in the same security or similar securities.
When to go to FINRA directly
Investors interact with FINRA most often through BrokerCheck for research purposes, but FINRA also provides direct channels for filing complaints, accessing market data, and verifying regulatory requirements.
If you believe your broker-dealer or registered representative has violated conduct rules, you can file a complaint through FINRA's online complaint form. FINRA investigates complaints and may open an enforcement action against the firm or individual. Filing a complaint with FINRA does not start an arbitration case; if you are seeking monetary recovery, you would also need to file for arbitration through FINRA's dispute resolution program separately.
FINRA's website publishes its rulebook, which contains all currently effective rules governing broker-dealer conduct. Investors who want to understand what specific obligations their broker owes them, or who are evaluating whether a particular action by their broker was permissible, can reference the relevant rule directly.
FINRA also publishes investor education materials through its FINRA Investor Education Foundation, covering topics from basic investment concepts to specific guidance on avoiding fraud. These materials are peer-reviewed for accuracy and are a reliable starting point for understanding broker-dealer regulation and investor rights.
FAQ
Is FINRA a government agency?
No. FINRA is a non-governmental self-regulatory organization authorized and overseen by the SEC. It operates under the Securities Exchange Act of 1934, which permits the SEC to delegate rulemaking and enforcement for broker-dealers to SROs. FINRA's members are the broker-dealers themselves, who fund the organization's operations through fees.
How do I check if my broker has any complaints or disciplinary actions?
Use BrokerCheck at brokercheck.finra.org. Search by the broker's name or CRD number. The report shows registration history, employment history, and any regulatory actions, customer disputes, criminal events, or financial disclosures. A clean record means no reported events, not that no complaints were ever filed, since some settlements or withdrawals may not appear.
What is TRACE and why does it matter to bond investors?
TRACE is FINRA's Trade Reporting and Compliance Engine. Broker-dealers are required to report most secondary market bond transactions to TRACE within 15 minutes of execution. FINRA publishes this data, making bond transaction prices available to the public. Investors can use TRACE data to check whether the price they paid or received for a bond was reasonable relative to other trades on that day.
Educational use
This page is educational and informational. It does not tell a reader what to buy, sell, hold, or contribute, and it does not account for an individual's objectives, taxes, legal situation, benefits, debts, time horizon, or risk tolerance. Verify rules, limits, product terms, fees, and regulatory requirements from current primary sources before acting.