Final answer:
The Financial Industry Regulatory Authority (FINRA) determines three categories of personnel: Registered Representatives who execute trades, Principals who oversee regulatory compliance, and Operations Professionals who manage day-to-day operations. Each must meet specific qualifications to maintain industry standards.
Step-by-step explanation:
The Financial Industry Regulatory Authority (FINRA) is a government-authorized not-for-profit organization that oversees U.S. broker-dealers. FINRA defines three categories of personnel who must register with the organization, adhere to industry standards, and maintain the requisite qualifications:
- Registered Representatives: These professionals are also known as brokers and are the individuals who buy and sell securities on behalf of clients.
- Principals: Principals are responsible for overseeing the firm's compliance with financial regulations. They are typically in higher management or supervisory roles.
- Operations Professionals: Operations Professionals handle the day-to-day business activities of a broker-dealer which are critical to the operation of the firm, but they do not typically engage in activities that lead to sales or affect other core functions involving trades or managing client relationships.
Each category requires different levels of experience, qualifications, and exams. Registration helps ensure that all personnel are accountable and competent to perform their roles within the brokerage industry.