National Association of Securities Dealers (NASD) - Explained
What is the NASD?
Written by J. Mance Gordon
Updated at April 20th, 2024
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What is the National Association of Securities Dealers?
The National Association of Securities Dealers (NASD) was an independent organization assisting the Securities and Exchange Commission in regulating the financial market, particularly the NASDAQ stock market and over-the-counter markets.
It was founded in 1939 by a group of over-the-counter brokers and dealers to regulate the OTC market and to establish the legal and ethical standards of conduct for its members. Until 2007, the NASD played a crucial role in managing and monitoring the stock trading the U.S market.
What does the NASD Do?
The NASD was an independent body operated under the overall supervision of the Securities and Exchange Commission. The NASD was also responsible for administering the examinations for the investment professionals. It took a leading part in conceptualizing and founding the NASDAQ stock market and managing its stock operations.
In 2007, the National Association of Securities Dealers merged with the New York Stock Exchanges regulatory committee to form the Financial Industry Regulatory Authority (FINRA). The FINRA, like its predecessor, is also self-regulatory body working under the supervision of the Securities and Exchange Commission and oversees the stock market operations in the United States.
FINRA is sanctioned to implement the rules and regulations of the SEC. It monitors the individuals and firms engages in the security market and makes sure they comply with the rules and regulations. The FINRA also provides licensing of securities representatives involved in the market.
FINRA is responsible for managing the markets Central Registration Depository that records all the securities activities of individuals and funds. FINRA arbitration panels deal with all the financial market trading disputes. It facilitates the process of the arbitration and is responsible for issuing a final ruling on arbitration cases. The proceeding of arbitration is similar to the court proceeding but the cost is low. FINRA also collaborates with the North American Securities Administrators Association for overseeing the security market proceedings.