Info 1: financial Industry Regulated Authority (FINRA) definition
Info 2: how financial Industry regulated authority works
Info 3: FINRA vs SEC
Info 4: example of FINRA.
Opening information:
The Financial Industry regulated authority sentence breaks into four words financial, Industry, regulated, and authority. Financial means money matter activities, Industry means firm of business,
regulated means controller of something with some purpose, then authority means had the power to do something. Financial Industry regulated authority means a firm has the power to control the money matter things.
So now let’s have a look at what is a financial Industry-regulated Authority (FINRA), how the FINRA works in the stock market among all Corporations, and what is the difference between the FINRA and the Security and Exchange Commission, finally one clear example of the FINRA.
Info 1: financial Industry Regulated Authority (FINRA) definition
There are hundreds and thousands of brokers and dealers in the stock market, which helps all the small to big Investors to trade in the public market efficiently.
Among the thousands of brokers, not all of them are honest and do not break the rules of the government laws, so one of the authorized financial institutions ruled all brokers and dealers to maintain a fair market for all the stock Investors.
If the stock Investor loses money by the mistake of the stock broker or dealers, the registered broker and dealers with that Financial regulations will lead to punishment.
Here the financial regulations are the ones which are called financial Industries regulated Industries (FINRA), so let’s dive into how these financial Industries work in the stock market for all the stock Investors among all the Corporations.
Info 2: how financial Industry regulated authority works
FINRA is not a governments or government agency, instead, they are the regulator of a particular section of the stock market under the Security and Exchange Commission (SEC).
The reason FINRA works under the SEC, the SEC is not a government but a government agency who formed to regulate the entire stock market in 1934.
Therefore the FINRA’s core purpose is to regulate not all the Industries, but instead to regulate only the specific Industries as an oversight for the SEC. Therefore the FINRA specifically regulated the dealers and brokers of the stock market.
If Any of the stock brokers are not registered and approved based on the license from the FINRA means they are not trustworthy and guaranteed to the stock Investor money.
There is a high chance that certain brokers cheat the stock Investor by providing fake platforms or selling fake Securities.
In 2017, there was a stock broker named Grand Stock and Grand Forex, who cheated millions of dollars from the stock Investor by providing or showing fake platforms and licenses.
These activities of Grand stock broker are noted by the FINRA after some time, so the website and all the work they did would get blocked online.
However, the stock Investor who lost their money to fake brokers and dealers couldn’t get their money back because of invested in the non-registered and were not approved by the FINRA.
If the same cheating happened by the broker or dealers who are licensed with FINRA, then the whole stock Investor amount would be claimed by them back, and the broker and dealers would be punished based on law by SEC rules.
So the FINRA’s main activities would be to protect investors and provide a secure market under the SEC.
Most people are mainly confused about the Financial Industry Authority (FINRA) and the Security and Exchange Commission (SEC), so let’s jump into the key differences anyway.
Info 3: FINRA vs SEC
The difference between the FINRA and SEC is, that financial Industry-regulated authorities are regulators of the dealers and brokers that provide and give secure and fair market transactions and monitors among the stock Investors.
FINRA had only the power to regulate some specific market sections related to commission and spreads participants, but they didn’t have any full overall segmentation of the market.
Security and Exchange Commission had full control over all segmentation of the stock market, they had full authority to change rules and any kind of market participation.
So to make you more clear about the financial Industry regulated authority, let’s look into one clear example anyway.
Info 4: example of FINRA.
Say the Haku stock broker is the most famous in his niche. Their main purpose is to provide a discount on each trade commission the trader of Investors makes on the stocks.
The haku stock broker also issues stock in the market to grow their Industry, which generates multi-million dollars in their equities as a brokerage firm.
Here the hacku Industries was regulated by the Financial Industry Regulated Authority (FINRA) and the Security and Exchange Commission (SEC) also hacku needed to follow certain rules on the listed stock exchange.
Market rule: #100121
FINRA (Financial Industry-regulated Authority) is a market rule because it is a self-regulated organizations that work under the Securities and Exchange Commission which are the market participants.
Not following their rules and regulations is strictly prohibited. If your investor and not comply or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.