What Is FINRA Compliance And Why Is It Important?

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect investors, the integrity of the markets and regulation through a fair, efficient and effective regulatory system. The organization has about 3,600 employees and supports more than 400 member firms (including broker-dealers), which represent more than 80% of all U.S. trading volumes. FINRA also regulates two clearing corporations for securities transactions and more than 110,000 associated persons at its member firms who sell stocks, bonds or mutual funds to individual investors on behalf of these institutions—such as investment advisors; investment bankers; accountants; lawyers; insurance agents; registered reps or registered representatives.;

What Is FINRA?

FINRA is a non-profit, private corporation that oversees all registered broker-dealers (including banks, securities exchanges and clearing agencies) as well as investment advisers. FINRA’s mission is to protect America’s investors by maintaining the integrity of the financial markets while providing an efficient regulatory program that facilitates capital formation.

Why Is It Important to Comply With FINRA?

FINRA is the self-regulatory organization for all securities firms doing business with the public in the United States. FINRA enforces federal securities laws and rules of conduct, provides investors with a wide range of market information and data, monitors firms’ regulatory compliance, examines broker-dealers for their financial condition and customer protection standards, facilitates dispute resolution for customers who have complaints about their brokers or registered representatives, oversees activities at clearing agencies that facilitate trading in U.S.-traded securities on exchanges located outside the United States (foreign exchanges), supervises certain aspects of ATSs, including those that clear swaps; monitors investment companies; coordinates disciplinary actions against individuals working at member firms; administers an arbitration program to resolve disputes between member firms and their customers; oversees electronic communications networks (“ECNs”) used by market participants to trade equities; reviews proposed mergers involving broker/dealers or other financial service providers under its jurisdiction; recommends rule changes designed to promote competition among market participants through new product development or improved regulatory oversight processes to apply FINRA compliance.

What Are the 5 Key Rules That Affect Financial Advisors?

The five rules that affect financial advisors include:

  • Rule 206(4)-2, which covers the use of social media. This rule requires advisors to disclose their association with a company or product when they post on social media sites like Facebook and Twitter.
  • Rule 202(a)(11)-2, which addresses the use of chat text messaging apps such as WhatsApp or Kik Messenger by financial advisors. This rule requires them to disclose their association with a company or product when communicating via those platforms with clients who already have an established relationship with them (i.e., they’ve opened an account).
  • Rule 204-3, which covers communications with clients regarding products and services offered by third parties (such as insurance companies). Advisors must also inform these third parties that they are required by FINRA regulations not only not endorse nor recommend specific products but also disclose any conflicts of interest related thereto before entering into any contract relating thereto.”


FINRA is a very important regulatory body in the financial industry and it’s one that you should take seriously. FINRA and SEC compliance will help ensure that your clients are protected from any unscrupulous practices by their advisors and brokers.