FINRA: FINRA is the Financial Industry Regulatory Authority. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation of the securities industry. FINRA is not part of the government.
Mediation: An informal, voluntary process in which a mediator helps negotiate a mutually-acceptable resolution between disputing parties. If the parties cannot negotiate an acceptable settlement, they may still arbitrate or litigate their dispute.
Security: SEC definition includes: investment notes, stocks, treasury stocks, bonds, or debentures; certificates of interest or participation in a profit-sharing agreement or in oil, gas, or in other mineral royalty or lease, collateral-trust certificates or voting-trust certificates; investment contracts; certificates of deposit for one of the above; options, rights or warrants on one of the above or on any group or index of the above; or foreign currency options or rights. Commodity futures contracts or commodity options are not generally considered securities, but fall under the jurisdiction of the Commodities Futures Trading Commission. While whole life, term and universal life insurance are not considered securities, even though they may include some investment risk, variable life insurance is considered a security.
Shareholder Derivative Action: A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are unique because under traditional corporate law, management is responsible for bringing and defending the corporation against suit. Shareholder derivative suits permit a shareholder to initiate a suit when management has failed to do so.
Unsuitability: A suitability violation occurs when and investment made by a broker is inconsistent with the investor’s objectives, and the broker knows or should know the investment is inappropriate. A broker has a duty to learn the essential facts of a customer before he makes any recommendations. If a broker makes an unsuitable recommendation either because the recommendation is inconsistent with the investment objectives of the customer or the financial needs of the customer the broker and his company may be liable.