The difference between FINRA and the SEC.
FINRA and the SEC (Securities and Exchange Commission) are both regulatory organizations that oversee and regulate different aspects of the financial industry in the United States. While they share some similarities, there are also several key differences between the two organizations.
Scope of Authority:
The SEC is a federal agency that oversees and regulates the entire securities industry in the United States, including brokers, investment advisers, and public companies. Its primary goal is to “protect” investors, maintain fair and orderly markets, and facilitate capital formation.
FINRA, on the other hand, is a self-regulatory organization that oversees and regulates the behavior of brokerage firms and individual brokers. It is authorized by Congress to regulate the brokerage industry, with the goal of “protecting” investors and ensuring the “integrity” of the financial markets.
Rule-making and Enforcement:
The SEC has the authority to create and enforce rules and regulations that govern the behavior of all participants in the securities industry. It can conduct investigations, bring enforcement actions against firms and individuals who violate securities laws, and impose fines and other penalties.
FINRA also has the authority to create and enforce rules and regulations, but its jurisdiction is limited to the brokerage industry. It can investigate and bring enforcement actions against brokers and brokerage firms, and can impose fines and other penalties. However, its powers are limited compared to the SEC.
Registration and Licensing:
The SEC is responsible for registering and licensing brokers, investment advisers, and public companies. It sets standards for disclosure, accounting, and financial reporting, and requires public companies to make regular filings to disclose information to investors.
FINRA is responsible for registering and licensing brokers and brokerage firms, ensuring that they meet certain professional standards and requirements. It also operates a database called BrokerCheck, which allows investors to research brokers and brokerage firms to ensure that they are properly registered and have a clean disciplinary history.
In summary, while both FINRA and the SEC are regulatory organizations that oversee and regulate the financial industry, they have different areas of authority and focus. The SEC oversees the entire securities industry, while FINRA specifically regulates the behavior of brokers and brokerage firms. Additionally, the SEC has broader rule making and enforcement powers, while FINRA’s jurisdiction is limited to the brokerage industry.
Who’s responsible for running FINRA?
FINRA (Financial Industry Regulatory Authority) is a private, not-for-profit organization that is authorized by Congress to regulate the brokerage industry. It is overseen by a Board of Governors, which is responsible for setting FINRA’s overall direction and strategy.
The Board of Governors is composed of 24 members, including 13 public governors and 10 industry governors. The public governors are individuals who are not currently associated with the securities industry, while the industry governors are individuals who work in the securities industry, such as executives from brokerage firms, banks, and other financial institutions. There is also one Small Firm Governor, who represents the interests of small brokerage firms.
The Board of Governors is led by a Chairman, who is elected by the Board and serves a one-year term. The Chairman is responsible for setting the agenda for Board meetings, presiding over meetings, and representing FINRA to the public and other organizations.
Day-to-day operations of FINRA are overseen by the CEO (Chief Executive Officer), who is appointed by the Board of Governors. The CEO is responsible for managing FINRA’s staff, budget, and operations, and for implementing the policies and rules established by the Board. As of 2021, the CEO of FINRA is Robert W. Cook.
Who oversees FINRA and the SEC?
The SEC is a federal agency that is responsible for enforcing federal securities laws and regulating the securities industry in the United States. It is ultimately responsible to the President of the United States and the Congress.
On the other hand, FINRA is subject to oversight by the SEC, which has the authority to review FINRA’s operations, rules, and enforcement actions.
In addition to oversight by the SEC, FINRA is also overseen by a board of governors, which is responsible for setting policy and overseeing FINRA’s operations. The board is made up of both industry and public representatives.