Last update: 28 August 2020
6 min read

Want to Understand FINRA Regulated Brokers?

Are you keen to find the very best FINRA regulated brokers which you can sign up to today? Read our FINRA report below to discover how the organization works, what they do, and tips on finding the most suitable broker for you.

FINRA is an independent self-regulatory organization that does not use any taxpayer money or Government funds for its operation. The funding for the agency’s operations are raised through membership fees, fines, and other advisory fees recovered through consultation for its members. This ensures the transparency of the agency in its regulatory proceedings and is committed to ensuring that all consumer rights are protected under the guidelines that are amended from time to time.

Read on to find out about FINRA including trading tips, how to make a complaint to FINRA, where to discover the best FINRA regulated brokers and much more.

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Where can I find the best FINRA regulated brokers?

As mentioned, FINRA regulated brokers can only deal in equities, futures, bonds, and options that are listed on the NYSE, and are not authorised to offer services for other financial instruments such as currencies or commodities. Therefore, it would be difficult to find brokers who also offer forex instruments, unless they are regulated by the NFA or CFTC under a different name. It is possible for a consumer to trade the currencies and commodities by contacting FINRA brokers regarding their subsidiaries or affiliates that provide such services.

How safe are the best FINRA regulated brokers?

The FINRA is considered as the leading authority for all firms operating in the NYSE. It has been proactive in ensuring the integrity of the US economy by constantly overseeing the functions of financial companies to prevent financial fraud.

The FINRA has been successful to a large extent, but there have been criticisms along the way due to the way the agency is operated. FINRA has received flak from several quarters regarding its partial nature towards companies when it comes to dishing out fines and revoking licenses. However, such criticisms are always a part and parcel of the financial markets, and the FINRA is still considered to be one of the best regulatory agencies in the world.

What is FINRA?

finra forex brokersFINRA is an independent and self-regulatory organization that is responsible for regulating members, as well as arbitration of financial services rendered in the New York Stock Exchange. FINRA was formed in 2007 and is considered to be the largest regulator of all financial companies that operates in the United States.

FINRA was preceded by the National Association of Securities Dealers, Inc. (NASD), an agency which worked with the NYSE Regulation Inc. in the regulation of the NYSE prior to 2007. After a significant recapitalization of NASDAQ in 2007, FINRA was formed through an SEC approved merger between NASD and NYSE Regulation Inc.

What does FINRA do?

Most brokers are regulated by the CFTC and the NFA, as the FINRA is more oriented towards regulating companies that deal in equities, bonds, futures, and options. Therefore, it is difficult to find the best FINRA regulated brokers that deal exclusively in currencies or commodities. However, member companies are free to offer forex trading related services by being a member of the NFA and the CFTC, along with being a member of the FINRA. In most cases, a single parent company creates two different subsidiaries or affiliates for equities trading – as well as forex trading – to ensure that there is transparency in the services provided.

The ultimate aim of FINRA is to create a liquid and transparent financial market that works in favour of both the economy and the investor.

Making a complaint to FINRA

FINRA plays an integral role in bridging the gap between the consumer and a company by offering the largest arbitration forum in the United States for resolving consumer complaints. The organization has an excellent arbitration procedure in place to ensure that you’ll be adequately represented at problem resolution panels.

FINRA is one of the few self-regulatory agencies in the world that has consistent results as far as complaint resolutions are concerned, and consumers find the FINRA arbitration forum to be highly effective in fighting financial fraud and abuse.
Not only do they safeguard the interest of the consumer, but also provide arbitration services for disputes arising between a firm and its employees. This includes arbitration between firms, stakeholders, employees, investors, and other individuals who are associated with the firm.

How to lodge your complaint

According to the FINRA regulatory framework, it is mandatory for all financial companies operating in the US under the FINRA to have binding arbitration agreements in all contracts.

The complaints process is incredibly straightforward as you can do it all online. Read through the instructions; FINRA will suggest you contact the broker directly, then read through their online brochures for a potential answer. If you don’t find one, you can follow the links on their website to raise a dispute. They’ll cover things like buy or sell orders, problems with your broker, and insider trading reports.

How does FINRA licensing & regulation work?

FINRA works directly under the framework of the Securities and Exchange Commission (SEC) that is updated from time to time. FINRA regulates all financial entities that take part in the US financial markets, and also ensures that all members adhere to the regulatory guidelines without fail.

FINRA provides licences to all types of financial firms including:

  • Banks
  • Brokers
  • Broker-dealers
  • Affiliates
  • Insurance agents
  • Individual financial advisors
  • Other industry professionals

The organization also conducts a periodic regulatory exam for all of its members, making sure that all members are up-to-date regarding laws and protocols. FINRA regularly audits the performance of its members, which helps them in keeping the members honest in their dealings with the general public.

Checking if your broker is FINRA regulated

FINRA is at the forefront of educating investors and members about the best practices regarding the general code of conduct in the financial markets. They encourage investors to stay informed about the financial pitfalls and protect their interests by being proactive in their investment efforts.

As part of this, you should always make sure your broker has a valid FINRA license before you trade with them. Go to the broker’s website and look for a license number. Then, cross check this information on the official FINRA site to make sure it’s accurate.

Frequently Asked Questions (FAQs)

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