FINRA Governs Broker-Dealers

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

What must be true of a body before it counts as a self-regulatory organization on this outline?

A. It must be an industry body, given authority under SEC oversight to write and enforce rules for its own members B. It must be a government agency created directly by Congress. An SRO is explicitly an industry body, not a government one. C. It must operate with no SEC oversight at all. SEC oversight is part of the definition, not its absence. D. It must be funded directly by the U.S. Treasury. SROs are industry-funded, not funded directly by the Treasury.

How sure are you?

Sure Fairly sure Guessing

Correct: A. A self-regulatory organization is an industry body, not a government one, given authority under SEC oversight to write and enforce rules for its own members.

B. An SRO is explicitly an industry body, not a government one.

C. SEC oversight is part of the definition, not its absence.

D. SROs are industry-funded, not funded directly by the Treasury.

Unit: SIE outline 1.1.2

Question 2Harder

A rep at a FINRA member firm sells a new municipal issue without the required disclosure. The identical conduct then happens at a bank's own municipal dealer desk. In both cases, whose rule was broken, and does the enforcer change?

A. Different rules broken each time; FINRA enforces both. The rule does not change between the two scenarios, only the enforcer does. B. The same MSRB rule broken both times; FINRA enforces the broker-dealer case, the bank's own federal banking regulator enforces the bank case C. The same MSRB rule broken both times; the MSRB itself enforces both cases directly. The MSRB brings no enforcement action in either scenario; it has no examination staff. D. The same MSRB rule broken both times; the SEC enforces both cases directly. The SEC oversees the SRO structure; it is not the first-line enforcer in either scenario.

How sure are you?

Sure Fairly sure Guessing

Correct: B. The rule broken is MSRB Rule G-32 in both cases; the enforcer changes with the firm type, FINRA for the broker-dealer, the bank's own federal banking regulator for the bank dealer.

A. The rule does not change between the two scenarios, only the enforcer does.

C. The MSRB brings no enforcement action in either scenario; it has no examination staff.

D. The SEC oversees the SRO structure; it is not the first-line enforcer in either scenario.

Unit: SIE outline 1.1.2

Now answer