The Financial Industry Regulatory Authority, or FINRA, is a private organization that regulates the activities of brokerage firms and trading exchange markets. The purpose of FINRA is to monitor, review and control their activities and release reports to the public. In 2022, FINRA released an Examination and Risk Monitoring Program report to be marketed to brokerage firms all over Pennsylvania.
Complaints against brokerages
One complaint is that brokerages are not customer friendly enough and are not interested in pursuing the clients’ best interests. The firms also reportedly fail to find and address conflicts of interest, and they fail to disclose fees properly related to investments and securities offerings.
FINRA also found problems with the incorrect payment disclosures in client disclosure documents. In regard to policies and procedures, firms are failing to thoroughly describe certain rules and requirements and how they plan to comply with their own rules.
A new rule for 2022 requires that firms obtain the information of trusted contact persons. Rule 4512 states which professionals are allowed to contact them and the types of customer account information they can disclose.
Another new regulation is Rule 606, which requires the disclosure of specific customer order information by broker-dealers. The disclosures are required to help customers understand the processes of handling orders and making routing decisions.
Why FINRA is necessary
Brokerage firms are encouraged to use FINRA’s report as a guide for complying with federal securities laws. Each year, there are new materials and sections of information, such as information about funding portals, that are addressed in the annual report. The organization is committed to ensuring the integrity of investments and trades on the market. In return, the firms need to include the findings of each report in their compliance programs.