1.1 Regulatory Bodies & SROs
The US securities industry relies on federal oversight by the SEC combined with day-to-day self-regulation by SROs like FINRA and the MSRB.
Key FINRA Exam Takeaways
- SEC (Securities and Exchange Commission): Primary federal regulatory agency created by the Securities Exchange Act of 1934.
- Self-Regulatory Organizations (SROs): FINRA, MSRB, and CBOE regulate their member firms under SEC oversight.
- FINRA: Regulates broker-dealers and registered representatives; conducts examinations and enforcement.
- MSRB: Writes rules for municipal bond underwriting and trading; enforced by FINRA and bank regulators.
- Federal Reserve Board (FRB): Determines monetary policy; sets Regulation T margin requirements (50%).
SEC Oversight vs. SRO Jurisdiction
The SEC is an independent federal government agency with ultimate civil enforcement authority. SROs like FINRA are private corporations authorized by Congress to write rules and discipline member broker-dealers and registered reps.
Knowledge Checkpoint • Section 1.1
Which regulatory body has the authority to write rules governing municipal securities dealers, but relies on FINRA and bank regulators for rule enforcement?