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Difficulty: EasySelf-Regulatory Organizations (SROs) and FINRA

Which of the following statements correctly describes the primary regulatory role and authority of the Financial Industry Regulatory Authority (FINRA)?

  1. It is a self-regulatory organization (SRO) that regulates member broker-dealers and registered representatives under the oversight of the SEC.Answer
  2. B
    It is a federal government agency possessing independent authority to criminally prosecute securities violations in federal court.
  3. C
    It is a banking regulator established by the Federal Reserve to supervise commercial lending and deposit accounts.
  4. D
    It is a market-making entity that trades securities from its own inventory to facilitate price stability on national exchanges.

Answer

FINRA is a self-regulatory organization (SRO) that regulates member broker-dealers and registered representatives under the oversight of the Securities and Exchange Commission (SEC).
The statement identifying FINRA as a self-regulatory organization (SRO) regulating member broker-dealers and registered representatives under SEC oversight is correct. FINRA establishes rules, conducts examinations, and enforces compliance across the securities industry, operating under SEC supervision.

Step-by-Step Solution

1
Identify FINRA's organizational classification.
FINRA is a private, non-governmental self-regulatory organization (SRO).
SROs are authorized by federal law to set industry standards and enforce compliance among member firms.
2
Determine FINRA's regulatory scope and supervisory hierarchy.
FINRA oversees broker-dealers and associated persons under the ultimate jurisdiction of the SEC.
The SEC serves as the federal regulatory body overseeing all SROs.

Key Concept

FINRA Organizational Structure and SRO Jurisdiction
Estimated Time:45s
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Topics

Self-Regulatory Organizations (SROs) and FINRA

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