Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkMedium
A broker-dealer firm is developing its internal policies regarding the use of social media by its registered representatives (RRs). The compliance officer is particularly concerned about ensuring that all communications comply with regulatory standards, including record-keeping and supervision. Which of the following best describes the regulatory body primarily responsible for issuing guidance and enforcing rules related to RRs' communications with the public, including social media?
- AThe Securities and Exchange Commission (SEC)
- BThe Financial Industry Regulatory Authority (FINRA)
- CThe Municipal Securities Rulemaking Board (MSRB)
- DThe North American Securities Administrators Association (NASAA)
Show answer & explanationAnswer & explanation
Correct answer: B. The Financial Industry Regulatory Authority (FINRA)
FINRA is the primary SRO for broker-dealers and their registered representatives. It issues extensive guidance and enforces rules regarding all forms of communication with the public, including social media, to ensure fairness, accuracy, and proper supervision and record-keeping.
Why the other options are wrong
- A. The SEC provides broad oversight and general rules, but FINRA provides the specific, detailed rules and guidance for broker-dealer communications.
- C. MSRB's focus is municipal securities, not general broker-dealer communications.
- D. NASAA is an organization of state securities regulators, not a primary issuer of rules for broker-dealer communications.
FINRA Communication Rules
FINRA establishes comprehensive rules governing how broker-dealers and their registered representatives communicate with the public, including social media, ensuring fairness, accuracy, and proper supervision and record-keeping.
- Rules cover advertising, sales literature, and correspondence.
- Require firms to supervise and retain records of communications.
- Guidance specifically addresses social media use by RRs.
Memory trick: FINRA sets the rules for all public chats.