Francisco Faraco Answers the Most Frequently Asked Questions About SROs Like FINRA

An SRO or self-regulatory organization may be affiliated with an organization or government, but it’s a standalone body that protects stakeholders by regulating a certain industry or profession. For instance, FINRA (Financial Industry Regulatory Authority), a financial SRO, has gone as far as to set up FINRA BrokerCheck to keep professionals in check.

In today’s article, Francisco Jose Faraco answers the most frequently asked questions about SROs.

Does the Government Regulate SROs?

Although SROs are self-regulating bodies, they are subject to government scrutiny and regulation. You see, SROs are an extension of government regulation. They can exercise the same power level because they represent the government to a certain extent.

Therefore, the government will regulate how SROs regulate an industry or profession. Not only that, but it’ll also demand a policy change should things change on a political level.

To What Extent Can an SRO Exercise Its Authority?

SROs don’t always bring the hammer down on an industry à la crypto regulation. Most of the time, they oversee activities, ensuring professionals and organizations representing the industry follow the rules and regulations of the job.

They also reserve the right to warn, penalize, and expel firms and professionals who don’t comply with the established criteria. By enforcing these penalties, SROs indirectly ensure follow-through on the rules and regulations.


Can an Industry/Profession Have More than One SRO?

As long as it’s self-regulated, structured like an SRO, and functions like an SRO, it’s an SRO. In other words, industries—not individual professions within that industry—can have more than one regulatory body.

For instance, many stock exchanges are structured like SROs. They are regulated by the government but have rules governing the trading profession. Similarly, the financial world has many SROs other than FINRA. Conversely, a profession or industry can have one SRO overseeing them. Case in point: American Dental Association.

Who Regulates FINRA?

FINRA is regulated by the Securities and Exchange Commission (SEC), a federal regulator formed by the US Congress. The registered members go to the SEC when they want to appeal an action by FINRA or expunge information from their FINRA BrokerCheck record.

FINRA Brokercheck Francisco Faraco implores future professionals to understand the workflow of appeals and public disclosures and how government regulation may influence independent, non-governmental regulation. As a Teaching Assistant in the Financial Mathematics program, his job is to protect the career of its students, just as FINRA BrokerCheck protects its stakeholders.

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