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

The Municipal Securities Rulemaking Board (MSRB) formulates rules governing municipal securities transactions. Which entity is responsible for inspecting and enforcing compliance with MSRB rules for registered non-bank broker-dealers?

  1. Financial Industry Regulatory Authority (FINRA)Answer
  2. B
    Municipal Securities Rulemaking Board (MSRB)
  3. C
    Federal Deposit Insurance Corporation (FDIC)
  4. D
    Depository Trust & Clearing Corporation (DTCC)

Answer

The Financial Industry Regulatory Authority (FINRA) enforces MSRB rules for registered non-bank broker-dealers.
The Municipal Securities Rulemaking Board (MSRB) creates regulations for municipal bond underwriting and trading, but it has no statutory authority to enforce its own rules or examine firms. For registered non-bank broker-dealers, enforcement and examination of MSRB rules are performed by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC).

Step-by-Step Solution

1
Identify the regulatory authority and statutory limits of the Municipal Securities Rulemaking Board (MSRB).
The MSRB is strictly a rulemaking body for the municipal securities industry and lacks statutory enforcement mechanisms.
Congress established the MSRB without enforcement powers to rely on existing securities and banking regulatory bodies.
2
Identify the entity responsible for enforcing MSRB regulations on non-bank securities firms.
FINRA examines member securities firms and enforces compliance with MSRB rules.
FINRA acts as the primary self-regulatory organization authorized by the SEC to inspect and enforce rule compliance among registered broker-dealers.

Key Concept

MSRB Rulemaking Scope vs. FINRA Enforcement Authority
Estimated Time:45s
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Topics

Regulatory Entities and Self-Regulatory Organizations (SROs)

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