FINRA vs. the SEC: What's the Difference?Understanding FINRA’s regulation rules can be overwhelming. If you struggle to navigate the organization’s laws, don’t worry; you are not alone.

The Financial Industry Regulation Authority is one of many agencies responsible for overseeing broker-dealers and their registered representatives in the United States. They are given the authority to enforce rules and impose sanctions on a violating firm.

FINRA is known for being strict in its regulation, requiring every business in the financial industry to have a message-archiving solution. But how do you effectively navigate their complex requirements?

What Does FINRA Do?

You might wonder why many companies are archiving text messages. Besides insights, financial firms are expected to have records by FINRA.

As mentioned, FINRA regulates the financial industry on behalf of the Securities and Exchange Commission (SEC). The U.S. Congress allows them to monitor financial activities to protect investors from fraud and illegal transactions.

FINRA examines and audits member companies regularly to ensure they comply with regulatory standards. These inspections may include sales strategies, supervisory systems, recordkeeping, advertising, and anti-money laundering processes. Failure to demonstrate proper compliance measures may result in disciplinary action.

It is worth noting that FINRA takes compliance seriously and will not hesitate to punish non-complying firms with fines, sanctions, suspensions, revocation of licenses, and even criminal prosecution in severe cases.

The Importance of FINRA Compliance

Complying with FINRA’s regulations is not optional; it is an obligation of every firm in the financial industry. The following are some of the significances of FINRA compliance:

  • Legal Obligation – all member companies are expected to follow compliance rules for best practice and legal responsibility.
  • Reputational Risk – If FINRA finds your company guilty of violations, your brand image could tarnish, causing you to lose customer trust.
  • Investor Protection – Compliance with FINRA’s regulations helps safeguard the interests of investors
  • Business Continuity–Complying with FINRA allows you to keep your licenses and operating permissions.

Complying with FINRA

To help ensure you maintain compliance, follow our tips below:

  • Stay Updated – It is imperative to keep yourself updated with any changes to FINRA’s rules and regulations so your business can adapt.
  • Conduct Regular Training–Always train your employees about best practices to ensure maximum compliance and reduce violation risks.
  • Perform Regular Audits–Conduct audits to identify areas of non-compliance in your business operations and take corrective action.
  • Maintain Accurate Records – Even the most minor errors in your records could result in a violation. Always check your business records to ensure they are free from inaccuracies and inconsistencies.
  • Use FINRA Compliance Tools – The organization has provided helpful compliance tools you can use to your advantage.
  • Invest in Archiving Software – to avoid multi-million fines, use text archiving software to maintain a permanent record of all messages sent to and from the company.

Message Archiving Solutions You Can Trust

Your company’s continuity relies on how well you can catch up to FINRA’s regulatory demands. To help ease your mind off of these requirements, we recommend investing in reliable message archiving software.

Award-winning archive provider LeapXpert has assisted hundreds of organizations in maintainingcompliance using their mobile-first platform. Visit their website to learn more and book a demo.

By Linda

Linda Green: Linda, a tech educator, offers resources for learning coding, app development, and other tech skills.