Overseers of the Securities Industry

The Congress of the United States of America
Over the decades, Congress has enacted and periodically revised several major laws that structure the U.S. securities markets. These statutes define which financial instruments are considered securities, how these securities are registered for initial placement as new issues, and how markets such as The Nasdaq Stock Market may operate. The statutes also provide for SROs such as FINRA. Congress oversees the SEC which, in turn, performs a similar function for all of the country's SROs, including FINRA.

 

Securities and Exchange Commission
The SEC is the federal agency charged with administering federal securities laws and providing federal oversight of the securities industry. The SEC enacts rules to implement the provisions of the federal securities laws. It also oversees the adoption of rules and the administration of discipline by SROs such as FINRA.

 

Self-Regulatory Organizations
FINRA, the MSRB, and the stock exchanges are referred to as SROs because of their statutory mandate to regulate this nation's securities markets, brokerage firms, and their personnel. FINRA and the exchanges have regulatory and enforcement powers to help monitor and maintain compliance with rules of fair practice for the industry and promote high standards of business conduct for the benefit of investors, member firms, and issuers of securities. The MSRB is an SRO with rulemaking authority for banks and securities firms engaged in municipal securities activities, but has no inspection or enforcement authority. Instead, FINRA is charged with inspection responsibility and enforcement of the MSRB's rules for its members. The qualification tests you will take to become registered are all administered by FINRA and were created by one or several of these SROs.

 

State Legislatures and Commissions
All states have "blue sky" laws regulating securities activities in their respective states. Generally, both you and your firm must be registered in each state in which you do business with customers. The rules of these jurisdictions are well-developed and often lengthy. Before you accept an order from a customer, you must check with your supervisor to be sure that both you and your firm are properly registered to do business in that state. Similarly, states have registration and exemption requirements concerning the securities offered to their residents. When in doubt about a particular security, ask your supervisor before executing a transaction.