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Difficulty: MediumSelf-Regulatory Organizations (SROs) and FINRA

While the Municipal Securities Rulemaking Board (MSRB) creates rules regulating municipal securities activities, it lacks statutory authority to inspect member firms or enforce its own rules, relying instead on FINRA and federal bank regulators for examination and enforcement.

Answer: Answer

Answer

True. The MSRB possesses rulemaking authority for municipal securities market participants but relies entirely on FINRA and banking regulators for examination and enforcement.
The statement is true because the MSRB was established by the Securities Acts Amendments of 1975 to formulate rules for municipal securities transactions, but Congress omitted examination and enforcement powers from its mandate. Enforcement responsibility for securities firms rests with FINRA, while enforcement for municipal dealer banks rests with bank regulators such as the FDIC, Federal Reserve Board, and OCC.

Step-by-Step Solution

1
Identify the statutory scope and purpose of the Municipal Securities Rulemaking Board (MSRB).
The MSRB establishes professional qualification, conduct, and trading rules governing municipal securities activities.
Establishing the core function of the MSRB as an SRO.
2
Evaluate enforcement jurisdiction across securities industry SROs.
The MSRB does not possess an enforcement or examination division; FINRA enforces MSRB rules for broker-dealers.
Distinguishing between rulemaking SROs and enforcing SROs.

Key Concept

Separation of Rulemaking and Enforcement Authority between MSRB and FINRA
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Topics

Self-Regulatory Organizations (SROs) and FINRA

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