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Difficulty: EasyRegulatory Entities and Self-Regulatory Organizations (SROs)

Which entity operates as an independent federal government agency empowered by Congress to maintain fair and orderly U.S. securities markets, rather than acting as a membership-funded self-regulatory organization (SRO)?

  1. Securities and Exchange Commission (SEC)Answer
  2. B
    Financial Industry Regulatory Authority (FINRA)
  3. C
    Municipal Securities Rulemaking Board (MSRB)
  4. D
    Depository Trust & Clearing Corporation (DTCC)

Answer

The Securities and Exchange Commission (SEC) is the independent federal government agency created by Congress.
The Securities and Exchange Commission (SEC) is an independent federal regulatory agency established by Congress under the Securities Exchange Act of 1934. It holds direct statutory jurisdiction over U.S. securities exchanges, broker-dealers, and SROs.

Step-by-Step Solution

1
Identify the legal standing and origin of each listed organization.
The SEC was created by an Act of Congress (Securities Exchange Act of 1934) as a federal regulatory agency.
Federal government agencies hold primary statutory law enforcement authority over financial markets, whereas SROs derive regulatory power through industry self-regulation supervised by the SEC.
2
Differentiate SROs and clearing entities from federal regulatory agencies.
FINRA and MSRB are SROs accountable to member firms and supervised by the SEC, while DTCC is an industry clearing corporation.
Understanding the hierarchy between statutory government agencies and self-regulatory membership organizations is fundamental to capital markets regulation.

Key Concept

Distinction between statutory federal regulatory entities and self-regulatory organizations (SROs)
Estimated Time:45s
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Topics

Regulatory Entities and Self-Regulatory Organizations (SROs)

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