FINRA & the SROs
Self-regulatory organizations are industry bodies that regulate their own members under SEC oversight; FINRA is the SRO for broker-dealers, while the MSRB writes rules for the municipal securities market.
The SIE loves the “who actually does X?” swap. The classic item gives you a function and four regulators: the tell is whether the body writes rules or enforces them. The MSRB drafts municipal rules, but enforcement falls to FINRA for non-bank dealers and the bank regulators (Fed, FDIC, OCC) for bank dealers — with the SEC overseeing all of it — so pick the enforcer, not the author. A related pattern asks which entity sits above the SROs: the answer is always the SEC, the federal agency that approves SRO rule changes; the SROs are self-regulators answerable to it.
The trap students fall into is treating “regulator” and “SRO” as interchangeable — the SEC and state regulators are government, while FINRA, the NYSE, and Cboe are private SROs. Don’t confuse this with the broker-dealer-vs-adviser split (a who-you-are question) or with market makers (a what-you-do trading role). Memory hook: SROs make the rules; the SEC rules the rule-makers.
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