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The National Association of Securities Dealers also known as the NASD, is the regulatory body primarily responsible for the regulation of persons involved in the securities industry in the United States. The Securities and Exchange Commission delegated this responsibility to the NASD. The NASD is a Self Regulatory Organization, or SRO, in that it is not directly a government agency. All firms dealing in securities that are not regulated by another SRO such as the Municipal Securities Rulemaking Board, the MSRB, are required to be member firms of the NASD. Also, persons licensed to make securities transactions with the public are known as registered representatives.
Regulation of the securities industry is an attempt to keep all persons working in the industry following ethical practices that are in the best interest of consumers. To enforce this, the NASD is given the power to levy fines against member firms and registered representatives that they deem have broken the rules.
To this end, the NASD is very valuable to the industry in building the public trust that their needs will be safeguarded. However, the sole funding of the NASD is from the fines and fees on member firms. This is criticized for the fact that it creates an incentive for the NASD to fine a firm for anything it can find solely in an effort to pay for the investigation costs already incurred, even if no serious violations are uncovered.
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