FINRA matters: Overview, definition, and example
What are FINRA matters?
FINRA matters refer to any regulatory, compliance, enforcement, or dispute-related issues that fall under the jurisdiction of the Financial Industry Regulatory Authority (FINRA). FINRA oversees broker-dealers, securities firms, and financial professionals in the U.S., ensuring that they comply with industry rules and regulations.
For example, if a brokerage firm is subject to a FINRA investigation regarding improper trading practices, this would be considered a FINRA matter requiring legal and regulatory attention.
Why are FINRA matters important?
FINRA matters are important because they directly impact financial institutions, brokers, and investors. Compliance with FINRA regulations helps maintain market integrity, protect investors, and prevent fraud or unethical practices in the securities industry.
For businesses and financial professionals, addressing FINRA matters properly ensures that they operate within the law, avoid penalties, and maintain their professional standing. Including a FINRA matters clause in agreements can clarify responsibilities, reporting obligations, and dispute resolution procedures related to FINRA compliance.
Understanding FINRA matters through an example
Imagine a brokerage firm receives a FINRA request for information regarding a potential violation of anti-money laundering (AML) regulations. The firm must respond promptly and cooperate with the investigation to avoid penalties or sanctions. This issue would be classified as a FINRA matter requiring internal review and legal compliance.
In another scenario, a financial advisor is involved in a client dispute over investment losses. The client files a complaint with FINRA’s arbitration system, which handles securities-related disputes. This arbitration case would be considered a FINRA matter, requiring resolution under FINRA’s rules.
An example of a FINRA matters clause
Here’s how a FINRA matters clause might appear in an agreement:
“Each Party agrees to comply with all applicable FINRA regulations and promptly notify the other Party of any FINRA inquiries, investigations, or enforcement actions that may affect their performance under this Agreement.”
Conclusion
FINRA matters encompass regulatory compliance, enforcement actions, and dispute resolution within the U.S. securities industry. Properly managing these matters ensures financial institutions and professionals remain in good standing and operate lawfully.By including a FINRA matters clause in agreements, businesses can ensure compliance with industry regulations, define responsibilities for handling regulatory inquiries, and protect themselves from potential legal and financial risks.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.