Free S-12 SRO Functions Questions and Answers — Questions and Answers
Question 1: What is the primary function of a Self-Regulatory Organization (SRO) in the securities industry?
- To issue bonds and securities to raise capital
- To regulate the activities of its members to ensure compliance with securities laws (Correct answer)
- To act as a government agency overseeing stock exchanges
- To provide legal advice to public companies
Correct answer: To regulate the activities of its members to ensure compliance with securities laws
SROs ensure that their members comply with federal securities laws and regulations, but they are not government entities.
Question 2: Which of the following is an example of a Self-Regulatory Organization?
- Federal Reserve
- FINRA (Financial Industry Regulatory Authority) (Correct answer)
- U.S. Department of Justice
- Securities and Exchange Commission (SEC)
Correct answer: FINRA (Financial Industry Regulatory Authority)
FINRA is a non-governmental organization that regulates broker-dealers and other members of the securities industry.
Question 3: What role does FINRA play in regulating broker-dealers?
- It enforces federal securities laws and handles criminal investigations
- It develops and enforces rules governing securities transactions (Correct answer)
- It issues initial public offerings (IPOs)
- It sets interest rates for securities
Correct answer: It develops and enforces rules governing securities transactions
FINRA ensures that broker-dealers adhere to rules designed to protect investors and maintain fair markets.
Question 4: Which of the following is NOT a function of an SRO?
- Establishing rules for fair and ethical trading practices
- Conducting investigations into potential violations of securities laws
- Setting monetary policy for the financial industry (Correct answer)
- Administering exams for individuals working in the securities industry
Correct answer: Setting monetary policy for the financial industry
SROs do not control monetary policy; that is the role of central banks, such as the Federal Reserve.
Question 5: Which of the following best describes the relationship between the SEC and SROs?
- The SEC oversees and approves the rules set by SROs (Correct answer)
- The SEC operates directly as the regulatory body for financial markets
- SROs independently regulate financial markets without SEC oversight
- The SEC provides funding to SROs
Correct answer: The SEC oversees and approves the rules set by SROs
While SROs have regulatory authority, the SEC provides oversight to ensure that SRO rules are consistent with federal securities laws.
Free S-12 SRO Functions Questions and Answers
What is the primary function of a Self-Regulatory Organization (SRO) in the securities industry?