This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
FINRA — the Financial Industry Regulatory Authority — is the self-regulatory organization that oversees US broker-dealers and their registered representatives. Every broker and registered representative in the United States must be a FINRA member. FINRA writes the rules that govern broker conduct, examines firms for compliance, and disciplines those that violate the rules. Understanding what FINRA does and how to use its tools helps you verify whether your broker is legitimate and whether it has a history of regulatory problems.
What FINRA Does
FINRA is not a government agency. It is a self-regulatory organization (SRO) authorized by Congress and overseen by the SEC. FINRA's responsibilities fall into four main categories:
Rulemaking: FINRA writes and maintains the rules that govern broker-dealer conduct in the United States. These rules cover everything from advertising standards to anti-money-laundering requirements to the suitability standard (the requirement that brokers recommend only investments that are appropriate for a given customer). FINRA rules have the force of law for member firms.
Examination: FINRA examines broker-dealers to verify compliance with its rules. Examinations may be routine (scheduled on a regular cycle) or triggered by specific concerns such as customer complaints, regulatory filings, or market events. During an examination, FINRA reviews a firm's books, records, procedures, and transactions.
Enforcement: When FINRA finds violations, it can impose sanctions including fines, restitution to harmed customers, suspension of individuals or firms, and — in the most serious cases — permanent bars from the industry. FINRA publishes enforcement actions publicly, creating transparency around broker misconduct.
Market Regulation: FINRA monitors trading activity on US equity and options markets for manipulative practices, insider trading, and other violations. This surveillance operates continuously across exchanges and trading venues.
FINRA's Enforcement Powers
FINRA has significant enforcement authority. The actions it can take include:
| Enforcement Action | Description |
|---|---|
| Censure | A formal reprimand, published publicly |
| Fine | Monetary penalty — can range from thousands to tens of millions of dollars |
| Restitution | Order to repay harmed customers |
| Suspension | Temporary bar from associating with any FINRA member firm |
| Bar | Permanent prohibition from the securities industry |
| Expulsion | Termination of a firm's FINRA membership — effectively shutting down its brokerage operations |
Major FINRA enforcement actions in recent years include:
- $70 million fine against Robinhood (2021): The largest FINRA fine in history at the time, for misleading customers about payment for order flow practices, approving options traders who did not qualify, and system outages during periods of high market volatility.
- Multiple nine-figure cases against major banks for research analyst conflicts, mutual fund sales practices, and anti-money-laundering deficiencies.
- Thousands of smaller actions annually against individual brokers for misconduct ranging from unauthorized trading to misappropriation of customer funds.
BrokerCheck: Your Due Diligence Tool
FINRA's BrokerCheck is a free public database at brokercheck.finra.org. It allows you to look up any broker-dealer or registered representative and see:
- Registration status: Is the firm or individual currently registered? With which firms?
- Employment history: For individuals, a 10-year history of all securities-industry employment.
- Examination history: Which qualification exams the individual has passed.
- Disclosures: Regulatory actions, criminal charges, customer complaints, civil judgments, arbitration awards, and bankruptcies.
- For firms: Regulatory actions, arbitration awards, and certain financial information.
How to Use BrokerCheck
- Go to brokercheck.finra.org.
- Search for the broker by name. Use the firm's legal name as it appears on your account statement.
- Review the "Firm Summary" section for registration status and years in business.
- Click "Disclosures" to see all regulatory actions, arbitration awards, and other events.
- Read the details of any disclosure — a single disclosure with a small dollar amount may be less concerning than a pattern of multiple disclosures.
A clean BrokerCheck report does not guarantee a broker is risk-free, but a BrokerCheck report showing multiple regulatory actions, customer complaints, or bars should be treated as a warning.
FINRA vs SEC vs State Regulators
| Body | Type | Primary Role | Who It Regulates |
|---|---|---|---|
| SEC | Federal agency | Securities laws, registration, enforcement | All market participants |
| FINRA | Self-regulatory organization | Broker rules, examination, discipline | Broker-dealers and registered reps |
| State securities regulators | State agencies | Local enforcement, licensing | Firms and individuals within the state |
The SEC creates the overarching regulatory framework. FINRA writes and enforces the specific rules that brokers must follow. State regulators provide an additional enforcement layer within their jurisdiction. Together, these three levels of oversight form the US securities regulation system.
How FINRA Protects Individual Investors
Beyond overseeing brokers, FINRA provides tools and resources for investors:
- BrokerCheck (described above) for due diligence on brokers and advisors.
- Investor Complaint Center for filing complaints about broker misconduct. FINRA investigates complaints and can take enforcement action.
- FINRA Arbitration for resolving disputes between investors and brokers outside of court. Many brokerage account agreements require arbitration rather than litigation.
- Investor Education including guides, alerts, and tools for understanding investment products and risks.
How to File a Complaint with FINRA
If you believe a broker has engaged in misconduct, you can file a complaint through the FINRA Investor Complaint Center:
- Gather documentation. Collect account statements, trade confirmations, correspondence with the broker, and any other records that support your complaint.
- File online at finra.org/complaint or call FINRA's helpline.
- Describe the issue factually. What happened, when, who was involved, what documentation supports your claim.
- FINRA reviews the complaint. Not every complaint results in enforcement action, but all complaints contribute to FINRA's surveillance and may trigger an examination.
For disputes involving money — where you seek financial compensation — FINRA arbitration or litigation may be more appropriate than a complaint. An attorney experienced in securities law can help assess your situation.
Frequently Asked Questions
Is FINRA a government agency? No. FINRA is a self-regulatory organization (SRO) — a private non-profit authorized by Congress to regulate its member firms under SEC oversight. Its rules have the force of law for members, but FINRA itself is not part of the government.
How is FINRA different from the SEC? The SEC is a federal government agency that creates securities laws and regulations and has broad enforcement authority over all securities market participants. FINRA is a self-regulatory organization that writes and enforces specific rules for broker-dealers. The SEC oversees FINRA.
What does it mean if a broker is not on BrokerCheck? If a firm or individual selling securities does not appear on BrokerCheck, they may not be a registered broker. Selling securities without registration is illegal. You should not do business with anyone claiming to be a broker who does not appear in BrokerCheck.
Can FINRA help me recover money from a bad investment? FINRA does not refund investor losses. If a broker violated FINRA rules, FINRA can order restitution (repayment to harmed customers) as part of an enforcement action. For individual disputes, FINRA arbitration or litigation may be more direct routes to recovery.
How do I check if a broker has been fined? Search the broker's name on BrokerCheck and review the "Disclosures" section. All FINRA enforcement actions are listed there. You can also search FINRA's disciplinary actions database at finra.org.
What's the difference between a customer complaint and a regulatory action on BrokerCheck? A customer complaint is an allegation made by a customer. A regulatory action is a formal finding or settlement by FINRA, the SEC, or another regulator. Regulatory actions carry more weight because they represent a regulator's determination that a violation occurred.
Do all brokers have to be FINRA members? Yes. Every broker-dealer that does business with the US public must be a FINRA member. If a broker claims to serve US customers but is not a FINRA member, it is operating illegally.
How often should I check my broker on BrokerCheck? Annually is a reasonable cadence. Also check when you first open an account, when your broker changes ownership, or if you see news about regulatory issues affecting the firm.
Where to Start
Look up your broker on BrokerCheck right now. Check for any disclosures or disciplinary actions. If you are evaluating a new broker, search it before opening an account. Use the regulation check guide for a complete step-by-step verification process. Read our broker reviews for individual broker assessments that include regulatory history.
Investing involves risk. The value of investments can go up as well as down and you may receive back less than your original investment. This review contains affiliate links. If you open an account through our link, we may receive a commission at no additional cost to you. Our reviews are independent and based on factual data.