Table of Contents

Understanding the National Association of Securities Dealers (NASD) and Its Role

By

Julia Kagan

Updated November 08, 2025

Reviewed by

Chip Stapleton

Traders and others work on the New York Stock Exchange (NYSE) floor on October 16, 2024 in New York City. — Spencer Platt / Getty Images

Definition

The National Association of Securities Dealers (NASD) was a self-regulatory organization in the securities industry from 1939 to 2007.

Key Takeaways

The NASD was a self-regulatory organization overseeing the U.S. securities industry and was a predecessor to FINRA.
Founded in 1939, the NASD played a significant role in regulating stock markets until 2007.
NASD was instrumental in managing the NASDAQ stock market and over-the-counter markets.
In 2007, the NASD merged with the New York Stock Exchange's regulatory arm to form FINRA.
FINRA now oversees all brokerage firms, ensuring compliance with SEC regulations.

What Was the National Association of Securities Dealers (NASD)?

The National Association of Securities Dealers (NASD) was a self-regulatory organization overseeing the securities industry, including Nasdaq and over-the-counter (OTC) markets. It also administered licensing exams like the Series 7.

In 2007, NASD merged with the regulatory arm of the New York Stock Exchange to form Financial Industry Regulatory Authority (FINRA), which continues its mission of protecting investors and maintaining market integrity. NASD's legacy remains central to modern U.S. market regulation.

Insights into the NASD's Formation and Operations

The NASD was founded in 1939, under provisions of the 1938 Maloney Act amendments to the Securities Exchange Act of 1934. It was also the leading founder of the NASDAQ stock market, which was established in 1971. Operating as an overseer of stock market operations for market activity and the NASDAQ under the overall supervision of the Securities and Exchange Commission (SEC), the NASD played a leading part in the management of stock trading in the market from 1939 to 2007. In that year, it merged with the regulation, enforcement, and arbitration arm of the New York Stock Exchange to form FINRA.

2007

The year NASD merged with the regulation, enforcement, and arbitration arm of the New York Stock Exchange to form the Financial Industry Regulatory Authority (FINRA).

Comparing NASD and FINRA: Roles and Responsibilities

FINRA is an independent regulatory entity that functions similarly to the NASD, overseeing all stock market operations in the United States. Its functions include the oversight of all brokerage firms, branch offices, and securities representatives. FINRA is monitored by the SEC and authorized to enforce the rules and regulations of the SEC.

It provides for and facilitates the licensing of securities representatives dealing in all aspects of the market. Its licensing requirements are developed in conjunction with the regulations and oversight of the SEC. Leading FINRA licenses include the Series 3, 6, and 7. Besides licensing, FINRA offers educational seminars and ensures regulatory compliance for market participants.

As the leading regulatory entity in the securities markets, FINRA manages the market’s Central Registration Depository (CRD), which includes records of securities activity for all firms and securities representatives trading in the market. FINRA is also the lead arbitrator for all financial market trading disputes. In the financial markets, arbitration is the leading procedure for resolution in dispute between entities and trading representatives. FINRA facilitates arbitration proceedings, which are similar to formal court cases but have lower costs. FINRA arbitration panels are responsible for issuing final rulings on arbitration cases.

FINRA collaborates with the North American Securities Administrators Association (NASAA), which oversees the licensing requirements of three key market licenses: the Series 63, 65, and 66.

What Was the National Association of Securities Dealers?

The NASD was a self-regulatory organization that oversaw and regulated the securities industry in the United States.

When Was the NASD Founded?

The NASD was founded in 1939, during a time when the U.S. securities markets were recovering from the Great Depression. Its creation was part of broader efforts to reform and regulate the financial industry, following the stock market crash of 1929.

What Were the Key Regulatory Bodies That Oversaw the NASD?

The NASD was primarily overseen by the SEC. The SEC had the authority to review NASD rules and actions to ensure they were consistent with federal securities laws. The NASD operated in conjunction with other regulatory bodies such as state securities regulators as well.

What Is the Relationship Between the NASD and FINRA?

In 2007, the NASD merged with the Regulatory Division of the New York Stock Exchange to form the Financial Industry Regulatory Authority. FINRA succeeded the NASD as the primary self-regulatory organization for the securities industry.

The Bottom Line

The National Association of Securities Dealers (NASD), founded in 1939 under the Maloney Act amendments to the Securities Exchange Act of 1934, served as a self-regulatory body for the U.S. securities industry.

It oversaw the NASDAQ market, enforced compliance, and administered exams like the Series 7 to ensure fair and transparent practices. In 2007, NASD merged with the NYSE's regulatory division to form FINRA, which continues its investor protection and market oversight under the SEC.

Open a New Account

The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.