A non-governmental entity with the power to create and enforce industry regulations and standards. SROs regulate their members, which typically include broker-dealers, investment advisors, and other financial professionals. These organizations work with government regulatory agencies, such as the Securities and Exchange Commission (SEC), to oversee member activities and enforce compliance with applicable laws and regulations.
Purpose and Authority
SROs aim to protect investors and maintain financial market integrity by establishing and enforcing rules and standards for their members. Their authority is granted by the government through legislation, such as the Securities Exchange Act of 1934, which requires the registration of national securities exchanges and associations as SROs.
- Primary goal: Protect investors and uphold market integrity.
- Authority source: Government legislation, such as the Securities Exchange Act of 1934.
Responsibilities
SROs have a range of responsibilities, including:
- Rule establishment: Creating rules and standards related to business conduct, financial responsibility, and market integrity.
- Compliance monitoring: Enforcing rules and applicable federal securities laws.
- Education and training: Promoting compliance and ethical behavior among members.
- Examinations and investigations: Conducting checks and imposing disciplinary actions for violations.
Oversight
While SROs have significant autonomy, they are subject to oversight by government agencies like the SEC. These agencies review and approve SRO rules and can take enforcement action against SROs that fail to fulfill their regulatory responsibilities.
- Oversight body: Government agencies like the SEC.
- Oversight role: Review and approve SRO rules, take enforcement action when necessary.