FINRA’s Role in Exam Licensing and Supervision
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🏛️ FINRA’s Role in Exam Licensing and Supervision
The Financial Industry Regulatory Authority (FINRA) is the primary self-regulatory organization (SRO) overseeing U.S. broker-dealers and registered representatives. If you’re pursuing securities licensing—like the Series 6, Series 7, Series 24, or others—understanding FINRA’s role is essential. FINRA not only administers qualification exams, but also supervises the individuals and firms registered to sell investment products.
🧾 1. FINRA and Securities Licensing
FINRA is responsible for creating, maintaining, and administering most qualification exams required for professionals entering the securities industry.
Key Exams FINRA Administers:
| Exam | Purpose |
|---|---|
| SIE (Securities Industry Essentials) | Introductory knowledge for all new reps |
| Series 6 | Limited rep – mutual funds, variable annuities |
| Series 7 | General securities representative |
| Series 24 | General securities principal – supervision |
| Series 79 | Investment banking representative |
| Series 99 | Operations professional |
Candidates must typically be sponsored by a FINRA-member firm (except for SIE) and registered via Form U4 through FINRA’s CRD (Central Registration Depository) system.
🧠 2. FINRA’s Regulatory Responsibilities
FINRA ensures that member firms and their registered representatives operate ethically, transparently, and in compliance with applicable laws.
FINRA’s Core Functions:
- Licensing & Registration: Maintains records on registered individuals and firms
- Examinations: Administers and updates content for qualification exams
- Rulemaking: Creates and enforces rules governing firm and rep conduct
- Supervision: Monitors broker-dealer activities and supervisory systems
- Enforcement: Investigates misconduct and imposes sanctions or suspensions
- Arbitration & Dispute Resolution: Resolves customer and industry disputes
🔍 3. Firm Supervision and FINRA Oversight
FINRA requires that all member firms establish and maintain Written Supervisory Procedures (WSPs) to oversee registered reps and ensure compliance.
Supervision Rules Include:
- Designating Principals (e.g., Series 24 holders) to oversee daily operations
- Conducting annual compliance meetings and regular branch inspections
- Implementing surveillance systems to monitor trading and communication
- Reviewing and approving retail communications and correspondence
📋 4. FINRA Rule Enforcement and Disciplinary Tools
When violations occur, FINRA can:
- Issue fines, suspensions, or revocations of registration
- Require firms to revise procedures or undergo heightened supervision
- Refer serious cases to the SEC or Department of Justice
Common violations include:
- Misrepresentation or fraud
- Failure to supervise
- Unsuitable recommendations
- Improper advertising or disclosure failures
🧭 5. FINRA’s Role vs. SEC and NASAA
| Function | FINRA | SEC | NASAA |
|---|---|---|---|
| Administers Exams | ✅ | ❌ | ✅ (63, 65, 66) |
| Enforces Rules | ✅ | ✅ | ✅ (at state level) |
| Oversees Broker-Dealers | ✅ | ✅ | ❌ |
| Oversees RIAs | ❌ | ✅ (over $100M AUM) | ✅ (under $100M AUM) |
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