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Difficulty: EasySelf-Regulatory Organizations (SROs) and FINRA

A financial services professional is establishing a new securities broker-dealer firm to execute stock trades for retail clients. Which self-regulatory organization (SRO) is primarily responsible for establishing industry conduct rules, licensing registered representatives, and overseeing member broker-dealers under SEC supervision?

  1. Financial Industry Regulatory Authority (FINRA)Answer
  2. B
    Securities and Exchange Commission (SEC)
  3. C
    Federal Reserve Board (FRB)
  4. D
    Federal Deposit Insurance Corporation (FDIC)

Answer

Financial Industry Regulatory Authority (FINRA)
Financial Industry Regulatory Authority (FINRA) is the largest self-regulatory organization (SRO) for securities firms doing business in the United States. It writes and enforces rules governing the ethical conduct of member broker-dealers and registered representatives under ultimate SEC oversight.

Step-by-Step Solution

1
Identify the entity type requested in the stem
The question asks specifically for a self-regulatory organization (SRO) supervising broker-dealers and associated persons.
SROs are non-governmental membership entities empowered by federal securities law to regulate their members.
2
Distinguish between government agencies and self-regulatory organizations
The Securities and Exchange Commission (SEC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) are federal government agencies, whereas FINRA is an SRO.
FINRA operates as a self-regulatory body accountable to the SEC for enforcing industry compliance among member firms.

Key Concept

SRO Status and Regulatory Scope of FINRA
Estimated Time:45s
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Topics

Self-Regulatory Organizations (SROs) and FINRA

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