Rule 5 of 6 in this unit1.1.2

1.1.2 Self-regulatory Organizations (SROs)

SIE outline 1.1.2

The MSRB Writes the Municipal Rulebook

Writes municipal-dealer rules: G-11, G-32, G-34 among them. Enforces none of them itself. NOT an enforcement body.

The trick

Common trap: The MSRB enforces the municipal rules it writes. Correct: It writes them. FINRA or a bank regulator enforces them. Writer and enforcer are two different questions.

The method for this kind of question
  1. This material is Section 1: 12 of the 75

Now answer

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

Which statutory provision is the hook for FINRA's existence as a registered securities association?

How sure are you?

Correct: C. Exchange Act Section 15A, Registered Securities Associations, is the provision under which FINRA registers with the SEC.
A. Securities Act Section 7 sets what a registration statement must contain, unrelated to an association's own registration.
B. Exchange Act Section 12 governs registration of securities, not of an association.
D. Securities Act Section 23 governs claims of SEC approval, a different subject entirely.

Unit: SIE outline 1.1.2

Question 2Above the exam

A bank that operates a municipal securities dealer desk fails, and separately, that same bank's affiliated broker-dealer violates an MSRB rule on an unrelated municipal bond sale. Which body insures the bank depositors, and which body enforces the MSRB rule violation at the broker-dealer?

How sure are you?

Correct: B. A bank failure is the FDIC's subject, insuring deposits up to its stated limit. The MSRB rule violation happened at the broker-dealer, a FINRA member firm, so FINRA enforces it there, regardless of the affiliated bank's separate failure.
A. SIPC responds to a failed brokerage, not a failed bank, and the MSRB never enforces its own rules.
C. The enforcer of an MSRB rule depends on where the violation occurred, at the broker-dealer, not on which entity in the group happened to fail; a bank regulator enforces MSRB rules against a bank municipal dealer, not against an affiliated broker-dealer.
D. Wrongly assigns SIPC to a bank failure and the wrong enforcer to the broker-dealer violation.

Unit: SIE outline 1.1.2

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