Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkEasy
A broker-dealer firm is developing its internal policies regarding the use of social media by its registered representatives. Which of the following is responsible for establishing rules that govern these communications?
- AThe Municipal Securities Rulemaking Board (MSRB)
- BThe Financial Industry Regulatory Authority (FINRA)
- CThe Securities and Exchange Commission (SEC)
- DThe North American Securities Administrators Association (NASAA)
Show answer & explanationAnswer & explanation
Correct answer: B. The Financial Industry Regulatory Authority (FINRA)
FINRA is the primary self-regulatory organization (SRO) for broker-dealers and registered representatives. It establishes and enforces rules governing their conduct, including communications with the public.
Why the other options are wrong
- A. The MSRB creates rules for municipal securities, but FINRA enforces them for broker-dealers.
- C. The SEC is the primary regulator but delegates daily oversight and rule-making for broker-dealer conduct to FINRA.
- D. NASAA is an organization of state securities regulators and does not typically establish rules for broker-dealer social media use.
FINRA's Role in Communication Rules
FINRA creates and enforces rules governing how broker-dealers and their registered representatives communicate with the public, including through social media.
- FINRA is the primary SRO for broker-dealers.
- Ensures fair and ethical practices in member communications.
- Covers all forms of communication, including electronic and social media.
Memory trick: FINRA's Rules Guide Firms' Communications.