Question

The Financial Industry Regulatory Authority(FINRA) explanation and history?

National Association of Securities Dealers(NASD) explanation and history?

Answer 1

FINRA

Explanation :- The Financial Industry Regulatory Authority is the largest independent regulator for all securities firms doing business in the United States. FINRA's mission is to protect investors by making sure the United States securities industry operates fairly and honestly. FINRA offers regulatory oversight over all securities firms that do business with the public, plus those offering professional training, testing, and licensing of registered persons, arbitration and mediation, market regulation by contract for the New York Stock Exchange, the NASDAQ Stock Market, Inc., the American Stock Exchange LLC, and the International Securities Exchange, LLC; and industry utilities, such as Trade Reporting Facilities and other over-the-counter operations. some key points as under :-

1.  FINRA oversees about 4,250 brokerage firms, about 162,155 branch offices and approximately 629,525 registered securities representatives.

2.  It has approximately 3,400 employees and operates from Washington, D.C. and New York, NY, with 20 regional offices around the country.

History :- The NASD was founded in 1939 and was registered with the SEC in response to the 1938 Maloney Act amendments to the Securities Exchange Act of 1934, which allowed it to supervise the conduct of its members subject to the oversight of the SEC. In 1971, NASD launched a new computerized stock trading system called the National Association of Securities Dealers Automated Quotations (NASDAQ) stock market. The NYSE and AMEX stock exchanges merged in 1998. Two years later, the NASDAQ underwent a major recapitalization and became an independent entity from NASD. In July 2007, the SEC approved the formation of a new SRO to be a successor to NASD.

The NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange were then consolidated into the Financial Industry Regulatory Authority (FINRA). In other words you can say "The Financial Industry Regulatory Authority was created as the result of the consolidation of the National Association of Securities Dealers (NASD) and the memberregulation, enforcement and arbitration operations of the New York Stock Exchange (NYSE)"

NASD

Explanation :- The National Association of Securities Dealers (NASD) was a self-regulatory organization of the securities industry and a predecessor of the Financial Industry Regulatory Authority (FINRA). It was responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. It also administrated exams for investment professionals, such as the Series 7 exam. The NASD was charged with watching over the NASDAQ’s market operations.

History :-

NASD was founded in 1939 in the wake of the 1938 Maloney Act amendments to the Securities Exchange Actof 1934. In cooperation with the United States Congress and the Securities and Exchange Commission (S.E.C.), the nation's dealers and brokers in over-the-counter securities joined together to regulate themselves, under the government's supervision. The market in over-the-counter (OTC) stocks was made up of transactions conducted between investors and "market makers" who were authorized to trade a company's stock. Between the association's founding in 1939 and 1970, it functioned primarily as a regulatory body for the activities of buyers and sellers of OTC stocks.

During this time, trades were carried out through a cumbersome process. In order to buy stock, it was necessary to shop around by phone among the various market makers, in order to see who was offering the best price. With this system, it was impossible to give a fixed price for any stock at any given time, so it was also impossible to keep track of whether a stock's price was rising or falling.

In 1971 NASD introduced an automated system that recorded all price quotes for a given stock by the different market makers authorized to sell it. "Bid" and "ask" quotes, the prices for which a dealer was willing to buy or sell a stock, along with volume figures, were updated once a day, in the same way that mimeographed stock listings had previously been left at each broker's door every morning. The new computerized system was called the National Association of Securities Dealers Automated Quotations(NASDAQ) stock market. With this move, NASD brought market transparency to the OTC stock market.

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