The Financial Industry Regulatory Authority (FINRA) was formed on August 6, 2007 to combine the regulatory resources of the New York Stock Exchange (NYSE) and National Association of Securities Dealers (NASD). FINRA is charged with the responsibility to resolve disputes between public investors, member firms and firm employees. FINRA is subject to oversight by the Securities Exchange Commission (SEC). FINRA establishes rules and regulations for the standards of care required for the handling of customer accounts. Brokerage firms and its financial advisors are required to submit themselves to binding arbitration as a way of resolving disputes the firms have with customers of theirs. The FINRA arbitration dispute resolution process is designed to protect investors from brokerage firms and its financial advisor misconduct, known as sales practice violations which results in investment losses.
Failure of brokerage firms and its financial advisors to comply with FINRA sales practice rules and regulations may result in a legal cause of action for the recovery of investment losses. Brokerage firms and financial advisor misconduct can be classified according to various types of activities which may result in a legal cause of action against them. The FINRA sales practice violations are often classified according to the following types of misconduct.