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Difficulty: MediumMunicipal Securities Rulemaking Board (MSRB) Rules and Scope

An independent compliance officer is reviewing the regulatory structure governing a non-bank broker-dealer that actively underwrites municipal bonds. While the Municipal Securities Rulemaking Board (MSRB) establishes the rules for municipal market participants, which entity is directly responsible for conducting routine examinations of this broker-dealer and enforcing compliance with MSRB rules?

  1. Financial Industry Regulatory Authority (FINRA)Answer
  2. B
    Municipal Securities Rulemaking Board (MSRB)
  3. C
    Federal Reserve Board (FRB)
  4. D
    Internal Revenue Service (IRS)

Answer

Financial Industry Regulatory Authority (FINRA)
Financial Industry Regulatory Authority (FINRA) is the correct answer because the MSRB possesses rulemaking authority only and does not enforce its rules or inspect firms. For non-bank broker-dealers, FINRA (along with the SEC) conducts examinations and enforces compliance with MSRB rules.

Step-by-Step Solution

1
Identify the rulemaking body and its statutory limits.
The Municipal Securities Rulemaking Board (MSRB) writes rules governing municipal securities firms, dealers, and advisors, but lacks authority to inspect firms or enforce compliance.
MSRB is strictly a rulemaking entity without enforcement powers.
2
Determine the entity responsible for enforcement based on firm type.
For securities firms (non-bank broker-dealers), enforcement of MSRB rules is delegated to FINRA (and the SEC).
FINRA inspects and disciplines non-bank securities dealers under SEC oversight.

Key Concept

MSRB Rulemaking Scope and Lack of Enforcement Authority
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Topics

Municipal Securities Rulemaking Board (MSRB) Rules and Scope

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