National Association of Securities Dealers (NASD)

Definition

The National Association of Securities Dealers (NASD) was a self-regulatory organization (SRO) in the U.S. securities industry from 1939 until 2007. It oversaw market operations, administered qualification exams for securities professionals, and played a leading role in the creation and regulation of the NASDAQ stock market.

History and role

• Founded in 1939 under the Maloney Act amendments to the Securities Exchange Act of 1934 to strengthen oversight of broker-dealers and protect investors.
• Helped establish NASDAQ in 1971 and monitored its market operations.
• Administered professional qualification exams (for example, the Series 7) and enforced industry rules among member firms and registered representatives.
• Operated under the overall supervision of the Securities and Exchange Commission (SEC), which reviewed NASD rules and actions for consistency with federal securities laws.

Merger and succession

In 2007 the NASD merged with the regulatory and enforcement arm of the New York Stock Exchange to form the Financial Industry Regulatory Authority (FINRA). FINRA succeeded the NASD as the primary SRO for the U.S. securities industry.

NASD vs. FINRA — what changed

FINRA retained and expanded many NASD responsibilities while consolidating NYSE regulatory functions. Key FINRA responsibilities include:
* Oversight of brokerage firms, branch offices, and individual securities representatives.
* Administration and enforcement of qualification and licensing requirements (e.g., Series exams).
* Management of the Central Registration Depository (CRD), the national database of broker-dealer and representative registration and disciplinary history.
* Operation of the industry arbitration forum for resolving disputes between investors, brokers, and firms.
* Provision of continuing education and compliance monitoring.

FINRA also coordinates with state regulators and organizations such as the North American Securities Administrators Association (NASAA), which oversees state-level licensing requirements tied to Series 63, 65, and 66 exams.

Key takeaways

• NASD was the main self-regulatory body for broker-dealers from 1939 until it merged into FINRA in 2007.
• It helped found and regulated NASDAQ and administered key industry exams.
• FINRA inherited NASD’s functions and added NYSE regulatory responsibilities, centralizing broker-dealer oversight, licensing, registration records (CRD), and arbitration.

Bottom line

The NASD played a central role in modern U.S. securities regulation by setting standards for broker-dealers and creating infrastructure for market oversight and professional qualification. Its 2007 merger into FINRA consolidated self-regulation and remains the foundation of industry oversight today.