US Forex Traders Can Rely on FINRA Forex Brokers to be Reliable and Trustworthy

FINRA logoWhen it comes to regulating financial services there are a number of regulatory bodies. Some of them are completely independent and self-regulating, while others are government organizations. Most countries will have just one regulatory body, but in the US there are three of them. The NFA, the CFTC, and FINRA are the three names anyone trading foreign currencies should be concerned with. Using the services of a regulated broker is always going to be the safest option. And in the USA any Forex broker offering trading services to the general public has to be licensed and regulated by one of the three.

What is FINRA?

FINRA stands for the Financial Industry Regulatory Authority and is a self-regulating and independent organization that has responsibility for regulating and arbitrating financial services that are rendered in the New York stock exchange. It was formed less than 10 years ago but is now considered to be the largest regulator of financial companies operating in the USA. This doesn’t mean there wasn’t a regulatory body before FINRA’s creation. In fact, FINRA replaced the National Association of Securities Dealers Inc. (NASD) in 2007. NASD worked closely with the NYSE Regulation Inc. But the two organizations merged in 2007 when NASDAQ was recapitalized.

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FINRA regulated brokers generally don’t just offer Forex services

Forex brokers looking to offer services to US residents generally tend to become licensed and registered with the NFA and CFTC. This is because FINRA is more concerned with regulating companies that offer equity, bonds, options, and futures trading and related services. Most FINRA Forex brokers will, therefore, offer other trading services rather than just currencies or commodities. It is usual for any Forex brokers regulated by FINRA to be licensed and regulated by the NFA and the CFTC as well. This is because most parent companies will have two different umbrella companies or partners, one for Forex trading and one equities trading. This ensures that the services provided are completely transparent.

Is it easy to find FINRA regulated brokers?

Brokers regulated by FINRA tend to just offer trading services in relation to options, bonds, futures, and equities listed on the New York Stock Exchange. They are unable to offer services related to other financial instruments such as commodities and currencies. What usually happens is that a broker regulated by the NFA will also be regulated by the NFA or the CFTC under a different name. If a trader wants to trade currencies and commodities with a FINRA regulated broker they will have to get in touch with the broker and ask whether it has any subsidiaries or affiliates that offer such services.

How FINRA protects the interests of consumers

FINRA uses the framework of the SEC (Securities and Exchanges Commission), which are regularly updated. Any kind of financial services provider that wishes to offer its services to US citizens has to comply with the regulatory guidelines. As well as ensuring FINRA members follow the rules, it also has responsibility for issuing licenses. It provides licenses for banks, insurance agents, financial advisors, brokers, dealers, and other financial professionals.

To ensure that all members are following the rules FINRA performs regulatory exams that cover various aspects of the regulatory guidelines. This ensures all members stay up to date with the law relating to operational protocols of financial companies and any changes that may have been made. The performance of members is also regularly audited to ensure their consumer dealings are kept honest.

Educating investors and members is also considered an important part of the work of FINRA. Not only do they encourage investors to keep up to date and informed in order to protect their own interests and reduce the risk of falling foul of a financial pitfall. They also educate members about the best way to ensure they are following the general code of practice.

There is one more important service FINRA have chosen to provide.

FINRA is big on arbitration

There are only a few regulatory bodies that choose to get involved when it comes to arbitration. FINRA happens to be one of these bodies and is able to offer a very good service for resolving consumer complaints. It bridges the gap between a consumer and a company very effectively and currently offers the largest arbitration forum in the United States. An excellent arbitration procedure has been put in place which ensures consumers receive adequate representation when faced with a problem resolution panel. The procedure has proved to be so successful at fighting financial abuse and fraud

FINRA has also gone one step further, by providing arbitration services for disputes that may arise between an employer and its employees. FINRA has also made it mandatory for its members to include binding arbitration agreements in all their contracts.

FINRA has made quite a name for itself, particularly in relation to firms operating in the New York stock exchange. It has also been very proactive in maintaining the integrity of the US economy. This has been done by keeping close control over the functions of financial companies to reduce the likelihood of financial fraud. FINRA has received some criticisms regarding its operations. Accusations have come from various quarters with regards its reticence to impose fines and revoke licenses. But on the whole, it is considered to be very successful, and much of the bad press is just a part of the financial markets. FINRA is an independent self-regulating organization. It receives no money from the government or the taxpayer. Costs are covered via membership fees, advisory fees, and fines. Which makes FINRA a very transparent agency that is committed to ensuring consumer rights are protected and guidelines are amended from time to time and followed.

Ultimately, FINRA aims to create a liquid and transparent marketplace for financial services. Which can only be seen as a good thing, both for individual investors and the US economy, in general. And choosing a FINRA regulated broker is going to be a sensible decision to make, as it is considered to be one of the best regulatory agencies in the world.