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SIE Chapter 10: Self-Regulatory Organizations (SROs)

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SEC — Securities and Exchange Commission
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is the federal regulator of the securities industry. Its main purpose is to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation. All securities exchanges, certain regulators (such as FINRA)' and financial firms that conduct a securities business and their employees are under the jurisdiction of the SEC. The SEC also has an enforcement arm to prosecute firms or individuals who violate SEC rules
1. A Self-Regulatory Organization:
a. is supported by its own members
b. sets rules, regulations, and penalties
c. allows its members to vote
2. FINRA- Financial Industry Regulatory Authority
3. MRSRB- Municipal Securities Rulemaking Board
4. NASAA- North American Securities Administrators Association
5. Stock and Options Exchanges
is a non-profit self-regulatory organization whose members include virtually all securities firms doing business in the US. When a securities firm is part of FINRA, the firm is referred to as a "member firm."
a. The basic purposes of FINRA are to standardize practices in the industry, establish and enforce fair and equitable rules for securities trading, and to establish a disciplinary body to enforce the rules to protect investors.
b. FINRA is now the largest self-regulatory organization (SRO) in the securities industry.
c. FINRA's main rule that underpins all of its regulations is this:
"A member, in the conduct of its business, shall observe high standards Of commercial honor and just and equitable principles of trade." It's a rule that can apply to any facet of a registered representative's behavior.
is a self-regulatory organization, consisting of representatives of securities firms, bank dealers, municipal advisors, issuers, investors and the public, that is charged with primary rulemaking authority over municipal securities dealers and municipal advisors in connection with their municipal securities and municipal advisory activities. MSRB rules are approved by the SEC, and enforced by the SEC, FINRA and the federal banking regulators depending on the regulated entity.