New York, NY securities attorney Jenice L. Malecki talks about the obligations of a brokerage firm or RIA in terms of supervision and oversight of its representatives or advisors. She explains that brokerage firms and registered investment advisors (RIAs) have very strict responsibilities to supervise all of their employees. Both types of firms manage other people’s money, making this obligation critical and one that must be taken seriously.

FINRA, the Financial Industry Regulatory Authority, imposes an extensive set of rules covering virtually every aspect of the securities industry—from communications with investors to investment structuring and trading. Firms bear the ultimate responsibility to ensure that, within the framework of their business model, all applicable rules are followed.

Registered investment advisors are similarly bound, primarily under the Investment Advisers Act of 1940. In practice, even in cases involving RIAs, FINRA rules are often consulted as a standard for industry practice and conduct, ensuring that all actions are performed correctly and in compliance with regulatory expectations.