| VOLUNTARY DISCLOSURE FOR FINANCIAL INFORMATION |
FINRA REGULATION, INC. IS A WHOLLY-CONTROLLED SUBSIDIARY OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA). AS THE PARENT ORGANIZATION, FINRA INCURS ALL DIRECT AND INDIRECT EXPENSES, INCLUDING SALARY AND BENEFITS. THE FINANCIAL INFORMATION INCLUDED IN THIS FORM 990 IS PRESENTED ON A STAND-ALONE BASIS, REFLECTING ONLY THOSE AMOUNTS ALIGNED WITH THE PROGRAMS CONDUCTED UNDER THE GOVERNANCE OF THE FINRA REGULATION BOARD OF DIRECTORS. THE STATEMENTS AND SCHEDULES IN THIS FORM 990 DO NOT REPRESENT THE CONSOLIDATED RESULTS FOR FINRA AND ITS SUBSIDIARIES. THE 2019 FORM 990 SHOULD BE READ IN CONJUNCTION WITH FINRA'S 2019 ANNUAL FINANCIAL REPORT, WHICH IS AVAILABLE AT WWW.FINRA.ORG/ABOUT/ANNUAL-REPORTS. SEE ALSO SEPARATE 2019 FORMS 990 FOR RELATED ENTITIES INCLUDING FINRA AND FINRA INVESTOR EDUCATION FOUNDATION. |
| 4A) MARKET REGULATION |
FINRA REGULATION'S MARKET REGULATION DEPARTMENT OVERSEES AND REGULATES OVER-THE-COUNTER TRADING OF EXCHANGE-LISTED AND NON-EXCHANGE-LISTED SECURITIES, CORPORATE AND MUNICIPAL DEBT, ASSET-BACKED SECURITIES AND TREASURY SECURITIES FOR COMPLIANCE WITH FINRA AND MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) RULES AND FEDERAL SECURITIES LAWS. MARKET REGULATION ALSO PROVIDES REGULATORY SERVICES TO THE CBOE, ISE, MIAX, NASDAQ AND NYSE EXCHANGE GROUPS, AS WELL AS THE BOX OPTIONS EXCHANGE, AND THE INVESTORS EXCHANGE, THE LONG-TERM STOCK EXCHANGE AND THE MEMBERS EXCHANGE. IN 2019, MARKET REGULATION OPENED 5,129 REVIEWS OR INVESTIGATIONS AND 241 EXAMINATIONS. IN ADDITION, THE DEPARTMENT REFERRED 767 MATTERS TO THE SECURITIES AND EXCHANGE COMMISSION. |
| 4B) MEMBER SUPERVISION |
FINRA REGULATION'S MEMBER SUPERVISION DEPARTMENT CONDUCTS REGULAR AND BRANCH OFFICE EXAMINATIONS OF ITS MEMBER FIRMS ON A SCHEDULE THAT IS ESTABLISHED BASED ON A RISK-PROFILE MODEL. IN ADDITION, MEMBER SUPERVISION CONDUCTS REVIEWS AND TARGETED EXAMINATIONS BASED ON INVESTOR COMPLAINTS, REFERRALS FROM OTHER FINRA REGULATION DEPARTMENTS, TERMINATIONS OF BROKERAGE EMPLOYEES FOR CAUSE, ARBITRATIONS AND REFERRALS FROM OTHER REGULATORS. MEMBER REGULATION ALSO DETERMINES EXAMINATION PRIORITIES AND CONDUCTS SPECIAL "SWEEPS" OF ITS MEMBER FIRMS TO TARGET ISSUES OF IMMEDIATE CONCERN. IN 2019, MEMBER SUPERVISION CONDUCTED MORE THAN 6,700 EXAMINATIONS. |
| 4C) ENFORCEMENT |
FINRA REGULATION DISCIPLINES SECURITIES FIRMS AND INDIVIDUALS IN THE SECURITIES INDUSTRY WHO VIOLATE THE FEDERAL SECURITIES LAWS AND RULES AS WELL AS FINRA AND MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) RULES. THROUGH ITS ENFORCEMENT DEPARTMENT, FINRA REGULATION BRINGS DISCIPLINARY ACTIONS AGAINST FIRMS AND THEIR EMPLOYEES THAT MAY RESULT IN SANCTIONS, INCLUDING CENSURES, FINES, SUSPENSIONS AND, IN EGREGIOUS CASES, EXPULSIONS OR BARS FROM THE INDUSTRY. IN APPROPRIATE CASES, FINRA REGULATION WILL REQUIRE FIRMS AND INDIVIDUALS TO PROVIDE RESTITUTION TO HARMED INVESTORS AND OFTEN IMPOSES OTHER CONDITIONS ON A FIRM'S BUSINESS TO PREVENT REPEATED WRONGDOING. IN 2019, FINRA REGULATION BROUGHT MORE THAN 800 NEW DISCIPLINARY ACTIONS AGAINST REGISTERED INDIVIDUALS AND FIRMS, LEVIED FINES TOTALING MORE THAN $39.5 MILLION AND ORDERED $27.9 MILLION IN RESTITUTION TO HARMED INVESTORS. IN ADDITION, FINRA REGULATION EXPELLED 6 FIRMS FROM THE SECURITIES INDUSTRY, BARRED 348 INDIVIDUALS AND SUSPENDED 415 BROKERS FROM ASSOCIATION WITH FINRA-REGULATED FIRMS. |
| 4D) NATIONAL CAUSE AND FINANCIAL CRIMES DETECTION PROGRAMS |
FINRA REGULATION'S NATIONAL CAUSE AND FINANCIAL CRIMES DETECTION PROGRAMS PROVIDE A HEIGHTENED AND EXPEDITED REVIEW OF ALLEGATIONS OF SERIOUS FRAUD, SERVE AS A CENTRAL POINT OF CONTACT INTERNALLY AND EXTERNALLY ON FRAUD-RELATED ISSUES, AND CONSOLIDATE RECOGNIZED EXPERTISE IN EXPEDITED FRAUD DETECTION AND INVESTIGATION. THIS DEPARTMENT IS RESPONSIBLE FOR CONDUCTING CONSOLIDATED SURVEILLANCE OF POTENTIAL INSIDER-TRADING ACROSS ALL U.S. MARKETS AS WELL AS CONDUCTING SURVEILLANCE OF LISTED AND OVER-THE-COUNTER SECURITIES FOR POTENTIAL FRAUDULENT ACTIVITY. THE DEPARTMENT ALSO HOUSES THE CENTRAL REVIEW GROUP, WHICH IS RESPONSIBLE FOR THE TRIAGE REVIEW OF TIPS, COMPLAINTS AND BROKER-DEALER FILINGS AND PERFORMS PRELIMINARY INVESTIGATIONS BASED ON CERTAIN REGULATORY FILINGS. IN ADDITION, THE NATIONAL CAUSE AND FINANCIAL CRIMES DETECTION PROGRAMS OVERSEE FINRA'S WHISTLE BLOWER PROGRAM. IN 2019, THE CENTRAL REVIEW GROUP'S FRONT END CAUSE UNIT REVIEWED OVER 24,000 MEMBER FIRM FILINGS, COMPLAINTS, TIPS AND LITIGATION AND ARBITRATION-RELATED MATTERS FOR POTENTIAL FRAUD. IN 2019, THE INSIDER TRADING SURVEILLANCE, FRAUD SURVEILLANCE, WHISTLE BLOWER AND CENTRAL REVIEW GROUP'S PRELIMINARY INVESTIGATIONS UNIT CONDUCTED INVESTIGATIONS THAT RESULTED IN MORE THAN 790 FORMAL REFERRALS TO THE SEC, OTHER FOREIGN, FEDERAL OR STATE REGULATORY OR LAW ENFORCEMENT AGENCIES, OR OTHER INTERNAL FINRA DEPARTMENTS. THESE REFERRALS INVOLVED POTENTIAL FRAUDULENT CONDUCT INCLUDING INSIDER TRADING, MICROCAP FRAUD SCHEMES, ISSUER FRAUD, THEFT BY PERSONS OUTSIDE FINRA'S JURISDICTION, PONZI-TYPE SCHEMES, AND OTHER POTENTIAL VIOLATIONS OF FEDERAL SECURITIES LAWS, STATE SECURITIES REGULATIONS OR FINRA RULES. |
| 4E) REGISTRATION AND DISCLOSURE |
ANY PERSON ENGAGED IN THE SECURITIES BUSINESS OF A FIRM, INCLUDING PARTNERS, OFFICERS, DIRECTORS, BRANCH MANAGERS, DEPARTMENT SUPERVISORS AND SALESPERSONS MUST REGISTER WITH FINRA. THROUGH ITS REGISTRATION AND DISCLOSURE DEPARTMENT, FINRA REGULATION OPERATES CRD, THE CENTRAL LICENSING AND REGISTRATION SYSTEM FOR THE U.S. SECURITIES INDUSTRY AND ITS REGULATORS. FINRA REGULATION ALSO OPERATES THE INVESTMENT ADVISER REGISTRATION DEPOSITORY ON BEHALF OF THE SEC. THESE SYSTEMS CONTAIN THE REGISTRATION RECORDS OF MORE THAN 3,600 FINRA AND OTHER REGISTERED BROKER DEALERS AND MORE THAN 31,000 INVESTMENT ADVISERS, AS WELL AS THE QUALIFICATION, EMPLOYMENT, AND DISCLOSURE HISTORIES OF MORE THAN 624,000 ACTIVE REGISTERED INDIVIDUALS. FINRA REGULATION ALSO OPERATES THE BROKERCHECK PROGRAM, AN ONLINE SYSTEM FOR INVESTORS TO REVIEW THE BACKGROUNDS OF INVESTMENT PROFESSIONALS. BROKERCHECK CONTAINS RECORDS ON 1.1 MILLION CURRENT AND FORMER BROKERS AND OVER 20,500 CURRENT AND FORMER BROKER-DEALERS. |
| 4F) OFFICE OF DISPUTE RESOLUTION |
FINRA REGULATION'S OFFICE OF DISPUTE RESOLUTION OPERATES A DISPUTE RESOLUTION FORUM FOR INVESTORS, BROKERAGE FIRMS AND THEIR REGISTERED EMPLOYEES, AND ADMINISTERS ARBITRATIONS AND MEDIATIONS THROUGH A NETWORK OF FOUR REGIONAL OFFICES, WITH 71 HEARING LOCATIONS INCLUDING ONE IN EACH STATE AND PUERTO RICO. IN 2019, THE OFFICE OF DISPUTE RESOLUTION ADMINISTERED 3,757 ARBITRATIONS AND 588 MEDIATIONS. |
| Form 990, Part V, Line 15 |
EXCISE TAX FOR COVERED EMPLOYEES WAS REPORTED AND PAID BY FINRA REGULATION'S PARENT, THE FINANCIAL INDUSTRY REGULATORY AUTHORITY. |
| Form 990, Part VI, Line 6 Classes of members or stockholders |
FINRA IS THE SOLE NOT-FOR-PROFIT STOCKHOLDER OF FINRA REGULATION, INC. |
| Form 990, Part VI, Line 7a Members or stockholders electing members of governing body |
FINRA, THE SOLE NOT-FOR-PROFIT STOCKHOLDER, ELECTS ALL MEMBERS OF THE GOVERNING BODY. |
| Form 990, Part VI, Line 7b Decisions requiring approval by members or stockholders |
FINRA, THE SOLE NOT-FOR-PROFIT STOCKHOLDER, RETAINS THE FOLLOWING AUTHORITY AND FUNCTIONS: 1) TO EXERCISE OVERALL RESPONSIBILITY FOR ENSURING THAT THE ASSOCIATION'S STATUTORY AND SELF-REGULATORY OBLIGATIONS AND FUNCTIONS ARE FULFILLED 2) TO DELEGATE AUTHORITY TO THE SUBSIDIARIES TO TAKE ACTIONS ON BEHALF OF THE ASSOCIATION. 3) TO ELECT THE SUBSIDIARY BOARDS OF DIRECTORS. 4) TO REVIEW THE RULEMAKING AND DISCIPLINARY DECISIONS OF THE SUBSIDIARIES 5) TO COORDINATE ACTIONS OF THE SUBSIDIARY BOARDS AS NECESSARY. 6) TO RESOLVE ANY DISPUTES AMONG THE SUBSIDIARIES. 7) TO ADMINISTER COMMON OVERHEAD AND TECHNOLOGY OF THE SUBSIDIARIES. 8) TO ADMINISTER THE OFFICE OF INTERNAL REVIEW AS PROVIDED IN THE ASSOCIATION'S BY-LAWS. 9) TO MANAGE EXTERNAL ASSOCIATION RELATIONS ON MAJOR POLICY ISSUES. 10) TO DIRECT THE SUBSIDIARIES TO TAKE ACTION NECESSARY TO EFFECTUATE THE PURPOSES AND FUNCTIONS OF THE ASSOCIATION. 11) TO TAKE ACTION AB INITIO IN AN AREA OF RESPONSIBILITY DELEGATED TO SUBSIDIARIES. |
| Form 990, Part VI, Line 11b Review of form 990 by governing body |
THE FORM 990 WAS REVIEWED BY SENIOR MANAGEMENT AT VARIOUS STEPS THROUGHOUT THE PREPARATION CYCLE. THE AUDIT AND MANAGEMENT COMPENSATION COMMITTEES REVIEWED AND APPROVED THE ORGANIZATION'S 2019 FORM 990 BY UNANIMOUS WRITTEN CONSENT. THE BOARD WAS PROVIDED ACCESS TO THE FINAL FORM 990 FOR REVIEW (VIA A WEBSITE FOR BOARD MEMBERS ONLY) PRIOR TO FILING. |
| Form 990, Part VI, Line 12c Conflict of interest policy |
THE ORGANIZATION HAS WRITTEN CONFLICT OF INTEREST POLICIES FOR BOARD MEMBERS AND OFFICERS. THE WRITTEN CONFLICT OF INTEREST POLICY FOR BOARD MEMBERS REQUIRES INITIAL DISCLOSURE OF INTERESTS THAT COULD GIVE RISE TO CONFLICTS AS WELL AS ANNUAL DISCLOSURE BY THE SAME BOARD MEMBERS. ADDITIONALLY, THE WRITTEN POLICY CONTAINS AN ONGOING OBLIGATION OF BOARD MEMBERS TO DISCLOSE POTENTIAL CONFLICTS OF INTEREST AS THEY ARISE |
| Form 990, Part VI, Line 19 Required documents available to the public |
THE ORGANIZATION MAKES ITS GOVERNING DOCUMENTS AND THE FINRA CONSOLIDATED AUDITED FINANCIAL STATEMENTS AVAILABLE UPON REQUEST. |
| Form 990, Part VIII, Line 2f Other Program Service Revenue |
Other Program Related Fees - Total Revenue: 89436, Related or Exempt Function Revenue: 89436, Unrelated Business Revenue: , Revenue Excluded from Tax Under Sections 512, 513, or 514: ; |
| Form 990, Part XI, Line 9 Other changes in net assets or fund balances |
OTHER CHANGES IN NET ASSETS OR FUND BALANCES PRIMARILY RELATE TO ANY OR ALL OF THE FOLLOWING: CHANGES IN NET ASSETS/LIABILITIES AND ELIMINATION OF INTERCOMPANY TRANSACTIONS. FOR ADDITIONAL INFORMATION PLEASE SEE THE FINRA 2019 ANNUAL FINANCIAL REPORT WHICH IS AVAILABLE AT WWW.FINRA.ORG/ABOUT/ANNUAL-REPORTS. - -XXX-XX-XXXX; |
| FORM 990, PART VII, COLUMN B |
THE OFFICERS LISTED IN FORM 990, PART VII, COLUMN B, DEVOTE AN AVERAGE TOTAL OF 60 HOURS PER WEEK TO THE FILING ORGANIZATION AND ANY OR ALL OF THE FOLLOWING RELATED ORGANIZATIONS: FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., AND FINRA INVESTOR EDUCATION FOUNDATION. |
Attach to Form 990 or 990-EZ.