Deeper dives on diversification, wealth-building, and making the most of every investment
March 10, 2020
When choosing investment opportunities, you probably look for indications that a company or opportunity is legitimate. Financial regulations and qualifications are one indication that an investment partner is someone you can trust. But what’s the difference between SEC-qualified and FINRA regulated, and which of these factors is more important to investors?
The SEC is the Securities and Exchange Commission. It’s an agency of the federal government that was created after the stock market crash in 1929 that preceded the Great Depression. To help protect investors and stave off a future financial crash of such proportions, the federal government passed several acts in the 1930s, including the Securities Exchange Act. Those acts led to the creation of the SEC.
The mission of the SEC is to protect investors and ensure orderly and fair markets. It does so in part by enforcing the nation’s financial laws. It also manages qualification and accreditation processes for investors, clients and purchasers.
To become SEC-qualified, organizations must engage in a lengthy process that involves complying with all SEC rules and providing detailed documentation regarding the management of the company itself as well as its finances. The organization might also undergo audits by the SEC or other related entities, and maintaining the SEC-qualification requires ongoing reporting and audits.
In short, SEC-qualification forces a high-level of transparency on financial organizations. While there’s no sure thing in investing, the knowledge that a company is secure enough in its own honesty and business sense to open its books to the federal government can provide some peace of mind.
FINRA stands for the Financial Industry Regulatory Authority. Unlike the SEC, this is not a government agency. It’s a self-regulatory organization that is one of the biggest broker regulators and licensers in the nation. The only investment firms and brokers that are regulated by FINRA are the organizations that choose to join FINRA.
Firms can join FINRA by completing the necessary application, paying membership fees and complying with FINRA rules and regulations. The fact that a company feels strong enough about accountability and regulation to join an organization like FINRA says a lot about whether it’s a safe financial partner. But the fact remains that in some ways, FINRA is a pay-to-play organization.
Consider this breakdown of the differences between the SEC and FINRA in deciding which one is most important to your investment decisions.
We’re proud to claim SEC-qualification since November 2018. That means we comply regularly with SEC regulations and audits and we’re transparent about our business practices. In June 2019, we even went back to the SEC to get qualified to lower our initial investment amount to $500.
When you work with us, your money is in great hands—and we work hard to make that a promise we can make to as many Americans as possible.