Compliance for Broker-Dealers:

The securities industry is highly regulated, and compliance with these regulations is critical to the success of any broker-dealer. Broker-dealers need to understand how FINRA rules and regulations work, what they entail, and how they can be met in order to thrive in this competitive industry.

What’s the Role of FINRA and SEC in Broker-Dealer Compliance?

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization (SRO), meaning it oversees its members’ compliance with federal securities laws and regulations. The Securities and Exchange Commission (SEC) is a federal regulatory agency that regulates broker-dealers through SROs like FINRA, but also directly when necessary.

Who is Regulated by FINRA?

FINRA regulates all broker-dealers and their associated persons. A broker-dealer is any person that:

  • Has a place of business in the U.S., or
  • Mails, transmits or otherwise delivers any advertisement, solicitation or communication (including an electronic communication) by means of the mails or private carrier to any address within the U.S., or
  • Solicits from persons located in the U.S., who respond outside of the U.S., and then completes transactions involving securities with them

What Are FINRA Rules & Regulations?

FINRA rules and regulations are designed to protect investors, the public, broker-dealers, and the financial markets.

The primary rulebook for FINRA is its Code of Arbitration Procedure for Securities Industry Disputes (SID). The SID contains all of FINRA’s procedural rules governing how arbitration cases are handled.

How Does Broker-Dealer Regulation Work?

The SEC and FINRA are not the same thing. The SEC regulates public companies, whereas FINRA regulates broker-dealers and their associated firms. As a self-regulatory organization (SRO), FINRA’s mission is to protect investors by ensuring transparency in the securities markets; maintaining fair, orderly, efficient and competitive markets; and removing impediments to investor protection through rulemaking.

FINRA does not work for or represent individual investors; it exists solely for the benefit of its members: brokerage firms that trade securities on behalf of their clients (brokers) or issue securities directly (dealers).

What Is Required for Compliance with FINRA Rules and Regulations?

As a broker-dealer, you are required to comply with FINRA rules and regulations. Compliance is important for the success of your business because it involves many aspects of your business including:

  • Employees
  • Systems
  • Policies and procedures (policies)

Compliance requirements can be complicated and sometimes difficult to understand. The rules change frequently so it’s important that you stay up-to-date on what is required by FINRA at all times

How to Keep Your Business Compliant with FINRA.

To keep your business compliant with FINRA compliance, you’ll need to:

  • Ensure that your firm has the right licenses. If you are a broker-dealer or investment adviser, it’s important that you have the appropriate licenses and registrations in place.
  • Keep up with the latest rules and regulations. As a member of FINRA, your company is subject to its rules and regulations–and those can change over time as new laws come into effect across different industries (or even within specific industries). Make sure that everyone in charge of compliance at your brokerage firm understands what these changes mean for them so they can act accordingly when necessary!
  • Have an internal compliance officer who oversees all aspects related thereto such as education programs etcetera.”

The rules and regulations governing the broker-dealer industry such as FINRA and SEC compliance are complex, but knowing what they are can help your business succeed.