Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkHard
A newly registered representative (RR) is reviewing the roles of various regulatory bodies. They learn that FINRA's primary source of funding comes from:
- AFees assessed on member firms and registered persons.
- BInterest earned on its investment portfolio.
- CFederal tax revenues.
- DFines collected from enforcement actions against firms.
Show answer & explanationAnswer & explanation
Correct answer: A. Fees assessed on member firms and registered persons.
As a self-regulatory organization (SRO), FINRA is primarily funded by its members through fees assessed on broker-dealers and registered individuals. While FINRA does collect fines, these are not its primary source of operating revenue.
Why the other options are wrong
- B. While possible, investment income is not identified as FINRA's primary funding source.
- C. Federal tax revenues fund government agencies, not SROs like FINRA.
- D. Fines contribute to FINRA's revenue but are not its primary funding mechanism; primary funding comes from member fees.
FINRA Funding
FINRA, as a self-regulatory organization (SRO), is primarily funded by fees and assessments collected from its member firms and registered individuals, rather than government funds or fines.
- Supported by the industry it regulates.
- Fees include membership, assessment, and qualification exam fees.
- Fines contribute but are not the main source of operating revenue.
Memory trick: FINRA's funds flow from its firm's fees.