Examkin

Question

Difficulty: Very hardSelf-Regulatory Organizations (SROs) and FINRA

While FINRA possesses broad authority to inspect records and require testimony from member firms and associated persons under Rule 8210, FINRA has statutory subpoena power to compel testimony and document production directly from non-member third parties who are not registered in the securities industry.

Answer: Answer

Answer

The statement is False. FINRA is a self-regulatory organization (SRO) with contractually derived regulatory authority over member firms and associated registered persons. FINRA does not possess statutory subpoena authority over non-member third parties.
The statement is false. As a self-regulatory organization (SRO), FINRA enforces compliance through contractual jurisdiction over member broker-dealers and associated persons. Under FINRA Rule 8210, FINRA can require registered entities and individuals to provide testimony and produce documents. However, FINRA lacks statutory subpoena authority to compel evidence or testimony from non-member third parties who are outside the securities industry. Obtaining information from such third parties requires referring the matter to the Securities and Exchange Commission (SEC) or law enforcement agencies that possess federal statutory subpoena powers.

Step-by-Step Solution

1
Determine FINRA's legal status and authority source.
FINRA is a non-governmental self-regulatory organization (SRO) accountable to the SEC.
SRO jurisdiction is established through voluntary membership and registration agreements rather than statutory power over the general public.
2
Analyze FINRA's investigative powers under FINRA Rule 8210.
Rule 8210 empowers FINRA to demand documents, audit books, and compel testimony strictly from member broker-dealers and associated registered representatives.
Rule 8210 acts as a contractual obligation binding only those who fall within FINRA's regulatory umbrella.
3
Compare FINRA's investigative reach with government statutory subpoena powers.
Unregistered third parties (such as unaffiliated bank employees, customers, or vendor contractors) cannot be subpoenaed by FINRA.
To obtain compelled testimony or evidence from non-member third parties, FINRA must request assistance from the SEC or other regulatory agencies that hold statutory subpoena power.

Key Concept

FINRA SRO Authority vs. SEC Statutory Subpoena Powers
Rate this question

Topics

Self-Regulatory Organizations (SROs) and FINRA

More questions from this topic