Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A financial professional, registered with FINRA, is found to have violated a federal securities law. Which of the following entities would be responsible for bringing criminal charges against this individual?
- AThe Municipal Securities Rulemaking Board (MSRB)
- BFINRA's Department of Enforcement
- CThe Department of Justice (DOJ)
- DThe Securities and Exchange Commission (SEC)
Show answer & explanationAnswer & explanation
Correct answer: C. The Department of Justice (DOJ)
While FINRA and the SEC can impose civil penalties and sanctions, only the Department of Justice (DOJ) has the authority to bring criminal charges for violations of federal laws, including federal securities laws.
Why the other options are wrong
- A. The MSRB writes rules for municipal securities but does not have enforcement power, let alone criminal prosecution authority.
- B. FINRA's enforcement arm handles disciplinary actions and civil penalties within the industry, not criminal charges.
- D. The SEC can bring civil enforcement actions and impose fines, but it does not bring criminal charges.
Criminal vs. Civil Enforcement
In the context of securities laws, civil enforcement (e.g., fines, suspensions) is handled by regulators like the SEC and SROs, while criminal enforcement (e.g., imprisonment) is handled by the Department of Justice.
- SEC and SROs (FINRA, MSRB) handle civil actions.
- DOJ handles criminal prosecutions.
- Criminal charges require a higher burden of proof.
Memory trick: Regulators fine, Justice confines.