So what is FINRA?

By: Cydney Posner

Many of you have probably started to hear references to something called "FINRA," the newly created Financial Industry Regulatory Authority. At the end of July, NASD and NYSE Regulation, Inc., a wholly-owned subsidiary of New York Stock Exchange LLC, were consolidated into a single organization to provide member firm regulation for securities firms that conduct business with the public in the U.S. In connection with that transaction, the member firm regulation and enforcement functions and employees from NYSE Regulation were transferred to the NASD and the expanded NASD adopted FINRA as its new corporate name. The purposes of the consolidation were to streamline the broker-dealer regulatory system, combine technologies and permit the establishment of a single set of rules and a single set of examiners with complementary areas of expertise within a single SRO. FINRA is subject to SEC oversight and is responsible for regulating all securities firms that do business with the public, including with respect to professional training, testing and licensing of registered persons, arbitration and mediation. By agreement, FINRA is also responsible for regulating The Nasdaq Stock Market, Inc., the American Stock Exchange LLC, and the International Securities Exchange, LLC, as well as for operating industry utilities, such as trade reporting facilities and other over-the-counter operations. NYSE Regulation continues to be responsible for regulatory oversight of trading on the NYSE, as well as market surveillance and listed company compliance at the NYSE and NYSE Arca.

To effect the consolidation, the NASD's rules were changed to incorporate into FINRA’s rulebook certain existing NYSE rules that pertain to the regulation of member firm conduct. These incorporated NYSE rules will apply to members of FINRA that were also members of NYSE on or after July 30, 2007. The plan is for FINRA to review and harmonize the duplicative NASD and NYSE rules governing member firm regulation, and the conflicting interpretations of those rules, to ultimately create one set of rules that would be applicable to these dual members. Until that time, FINRA has assumed examination, enforcement and surveillance responsibilities, to the extent that those responsibilities involve member firm regulation, relating to compliance by dual members with all of those "common rules." The applicable common rules (include rules such as NYSE Rule 472, Communications with the Public; NYSE Rule 445, Anti-Money Laundering Compliance Program; NYSE Rule 392, Notification Requirements for Offerings of Listed Securities; and NYSE Rule 344, Research Analysts and Supervisory Analysts).  FINRA expects that a significant portion of a harmonized rulebook will be submitted to the SEC within a year, with the remaining rules to be submitted within two years.

This content is provided for general informational purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Cooley LLP, Cooley (UK) LLP, or any other affiliated practice or entity (collectively referred to as “Cooley”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Do not send any confidential information to Cooley, as we do not have any duty to keep any information you provide to us confidential. This content may be considered Attorney Advertising and is subject to our legal notices.