If you are an investment broker, you know how important it is to behave ethically and responsibly when handling accounts for your clients. Unfortunately, however, some brokers take advantage of the trust clients have placed in them by unsuitable or excessive trading or other misconduct. The Financial Industry Regulatory Authority exists to prevent securities fraud from taking place and punishing it when it does.
The Securities and Exchange Commission supervises FINRA as it levies fines and brings other disciplinary actions against firms and brokers alleged to have engaged in unethical behavior and orders restitution for investors who came to harm as a result. Sometimes, instead of handling these cases itself, FINRA refers them to the SEC and other agencies as appropriate. Over 900 such cases got referred in 2018. During that same time period, FINRA ordered $25.5 million paid to investors for restitution and charged fines in the total amount of $61 million.
Acting with congressional authority, FINRA works to ensure the honest and fair operation of the broker-dealer industry in several important ways. It educates investors and fosters market transparency. It is also responsible for not only enforcing the rules governing the ethical activity of registered brokers and firms but writing them as well. Additionally, FINRA has the responsibility of examining firms to verify that they are compliant with the rules.
In these ways, and at no cost to taxpayers, FINRA works to safeguard the integrity of the market and provide protection to investors. This results in capital markets that are healthier and more vibrant due to greater investor confidence.