National Association of Securities Dealers (NASD)

Unraveling the National Association of Securities Dealers (NASD): A Comprehensive Guide

Exploring the NASD

The National Association of Securities Dealers (NASD) served as a pivotal self-regulatory organization within the securities industry, preceding the establishment of the Financial Industry Regulatory Authority (FINRA). Its scope encompassed the oversight and regulation of the NASDAQ stock market and over-the-counter markets, along with the administration of crucial examinations for investment professionals, such as the Series 7 exam.

A Historical Overview

Established in 1939 under the provisions of the 1938 Maloney Act amendments to the Securities Exchange Act of 1934, the NASD played a prominent role in shaping the landscape of stock trading. It was instrumental in founding the NASDAQ stock market in 1971, wielding authority over market operations until its merger with the New York Stock Exchange's regulatory arm in 2007.

NASD's Evolution into FINRA

In 2007, the NASD merged with the regulatory, enforcement, and arbitration arm of the New York Stock Exchange, culminating in the formation of FINRA. This transformative merger marked a significant milestone in the regulation of the securities industry, ushering in a new era of oversight and compliance.

Comparing NASD and FINRA

FINRA, the successor to NASD, operates independently as a regulatory entity overseeing stock market operations across the United States. Its responsibilities mirror those of the NASD, encompassing the supervision of brokerage firms, branch offices, and securities representatives. Under the watchful eye of the Securities and Exchange Commission (SEC), FINRA is empowered to enforce SEC regulations, ensuring market integrity and investor protection.

Educational Initiatives and Regulatory Oversight

In addition to licensing securities representatives and firms, FINRA conducts educational seminars and monitors market participants for regulatory compliance. It manages the Central Registration Depository (CRD), maintaining records of securities activity, and serves as the primary arbitrator for financial market disputes. Collaborating with the North American Securities Administrators Association (NASAA), FINRA plays a pivotal role in upholding market integrity and safeguarding investor interests.