Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A broker-dealer firm is reviewing its policies to ensure that all communications with the public, including websites and social media posts, comply with regulatory standards. Which organization is primarily responsible for establishing and enforcing these communication rules for its member firms?
- ASecurities and Exchange Commission (SEC)
- BMunicipal Securities Rulemaking Board (MSRB)
- CFinancial Industry Regulatory Authority (FINRA)
- DNorth American Securities Administrators Association (NASAA)
Show answer & explanationAnswer & explanation
Correct answer: C. Financial Industry Regulatory Authority (FINRA)
FINRA is the primary SRO responsible for regulating broker-dealers and their registered representatives. This includes establishing and enforcing rules regarding communications with the public to ensure they are fair, balanced, and not misleading.
Why the other options are wrong
- A. The SEC is the federal regulator, but FINRA sets the specific communication rules for its member broker-dealers.
- B. The MSRB sets rules for municipal securities, but FINRA enforces them for broker-dealers.
- D. NASAA is an organization of state securities administrators, not a primary SRO for broker-dealer communication rules.
FINRA Communication Rules
FINRA establishes and enforces rules for its member broker-dealers regarding all communications with the public, including advertisements, sales literature, and social media, to ensure they are fair, balanced, and not misleading.
- Applies to all public communications
- Ensures fairness and balance
- Prohibits misleading statements
- Includes social media, websites, ads
Memory trick: FINRA 'FINE'-tunes what firms 'SAY'.