Why Was FINRA Created?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
FINRA, or the Financial Industry Regulatory Authority, was created as a national organization that writes rules and regulations for professionals in the financial industry, licenses these individuals and organizations, and provides avenues for compensation and complaints for victims of negligent financial advising. FINRA, in its current form, has a long history, but the understanding its present function is also important. Especially if you were harmed by a breach of contract or financial negligence, it is important to understand what options FINRA gives you to recover damages against the financial professional who lost your investments. To discuss your potential case, call today for a free consultation with the FINRA arbitration lawyers at Epperson & Greenidge.
What Does FINRA Do?
FINRA was formed July 30, 2007, as a successor to the National Association of Securities Dealers (NASD). You may recognize this acronym as part of “NASDAQ,” the primary stock market in the United States (standing for National Association of Securities Dealers Automated Quotations). That organization regulated and operated the NASDAQ market and controlled examinations and licensure for financial industry professionals, like stockbrokers and financial advisors.
In 2007, FINRA was formed to take over these operations. That means that today, FINRA is in charge of testing and licensing all financial professionals in the US, regulating some aspects of the stock market, and working with the Securities Exchange Commission (SEC) to enforce regulations.
FINRA is an independent organization, not part of the government. Still, FINRA is authorized by Congress to do much of its regulatory work, and its rules typically have the authority to control its members. Much like other professional organizations, FINRA’s rules restrict financial professionals, preventing them from mismanaging funds, creating regulations to ensure transactions are fair, and writing rules to help protect client investments. Much of the rest of the regulation in this area comes from the SEC, who works closely with FINRA on many of its regulatory decisions.
FINRA also works to educate investors. This work helps raise awareness for scams like Ponzi schemes and other unfair practices that might harm investors. Alerting investors to problems like trade churning and unauthorized trading helps stop crooked brokers from taking advantage of potential investors, increasing the overall health and image of the financial industry.
Many of FINRA’s resources are also used to oversee and protect investments and investors. This helps prevent fraud, stop mishandling of funds by brokerage firms, ensure compliance with FINRA and SEC rules, and achieve other important goals.
How Does FINRA Handle Claims and Lawsuits?
One of the most important things that FINRA does for the public at large is create avenues to recover compensation and other damages for investors who were harmed by their financial advisors. While federal and state laws create opportunities for lawsuits, FINRA rules create more narrow rules and regulations that govern how financial advisors and stockbrokers must act. If a broker violates these rules, commits acts of negligent investing, or otherwise takes advantage of a client, the victim may be able to file a claim through FINRA rather than the courts.
While FINRA does not have judges that handle lawsuits, it does have arbitration and mediation programs. Arbitration and mediation are both alternatives to lawsuits which help financially injured investors make claims against their financial advisors or brokers.
Mediation is a system where a neutral mediator sits down with both parties to help them work out their differences. The mediator may recommend a solution, but that solution is not binding like a judge’s decisions. Additionally, either party can walk away from mediation whenever they want without facing sanctions.
Arbitration, on the other hand, is much more like taking a case to trial. Arbitration through FINRA is legally binding against financial professionals governed by FINRA, who agree to submit to FINRA’s rules and regulations as part of their professional certification. While there is no judge, a neutral financial professional (or a panel of 3 of them) acts as an arbiter, deciding factual and legal issues in your case. There are hearings that work much like a trial, where your attorney can present evidence of your financial harm and the advisor’s fault. Ultimately, FINRA arbitration helps many investors recoup their losses and get compensation against bad financial advisors and brokers.
Lastly, FINRA also handles professional complaints. While these may result in a broker or financial advisor paying fines or facing sanctions against their professional license, they usually cannot result in compensation for the victim. Talk to an attorney about which option is right for you.
Our FINRA Claims Lawyers Offer Free Consultations for Investors
If your investments were mishandled by a financial advisor or broker, talk to an attorney today. The FINRA claims attorneys at Epperson & Greenidge represent victims who were taken advantage of by their investment professionals and help them seek compensation and other damages through FINRA arbitration. For a free consultation on your case, contact our attorneys today at (877) 445-9261.