Self-regulatory organization
Encyclopedia
A self-regulatory organization (SRO) is an organization that exercises some degree of regulatory authority over an industry or profession. The regulatory authority could be applied in addition to some form of government regulation, or it could fill the vacuum of an absence of government oversight and regulation. The ability of an SRO to exercise regulatory authority does not necessarily derive from a grant of authority from the government.
In United States securities law, a self-regulatory organization is a defined term. The principal federal regulatory authority—the Securities and Exchange Commission (SEC)—was established by the Federal Securities Exchange Act of 1934
. The SEC originally delegated authority to the National Association of Securities Dealers (the NASD) and to the national stock exchanges (e.g., the NYSE
) to enforce certain industry standards and requirements related to securities trading and brokerage. On July 26, 2007 the SEC approved a merger of the enforcement arms of the NYSE and the NASD, to form a new SRO, the Financial Industry Regulatory Authority
(FINRA). In addition, Congress created the Municipal Securities Rulemaking Board
(the MSRB) as an SRO charged with adopting investor protection rules governing broker-dealers and banks that underwrite, trade and sell tax-exempt bonds, 529 college savings plans and other types of municipal securities.
The American Arbitration Association
is also an SRO with official, statutory status.
Because of the prominence of the SROs in the securities industry, the term SRO is often used too narrowly to describe an organization authorized by statute or government agency to exercise control over a certain aspect of the industry.
The National Association of Realtors
(NAR) is an example of an SRO that fills the vacuum left by the absence of government oversight or regulation. The NAR sets the rules for Multiple Listing Service
s and how brokers use them. Another example is the American Medical Association
which sets rules for ethics, conflicts, disciplinary action, and accreditation in medicine.
In United States securities law, a self-regulatory organization is a defined term. The principal federal regulatory authority—the Securities and Exchange Commission (SEC)—was established by the Federal Securities Exchange Act of 1934
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...
. The SEC originally delegated authority to the National Association of Securities Dealers (the NASD) and to the national stock exchanges (e.g., the NYSE
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
) to enforce certain industry standards and requirements related to securities trading and brokerage. On July 26, 2007 the SEC approved a merger of the enforcement arms of the NYSE and the NASD, to form a new SRO, the Financial Industry Regulatory Authority
Financial Industry Regulatory Authority
In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization . FINRA is the successor to the National Association of Securities Dealers, Inc. ...
(FINRA). In addition, Congress created the Municipal Securities Rulemaking Board
Municipal Securities Rulemaking Board
The Municipal Securities Rulemaking Board, often referred to as the MSRB, writes investor protection rules and other rules regulating broker-dealers and banks in the United States municipal securities market, including tax-exempt and taxable municipal bonds, municipal notes, and other securities...
(the MSRB) as an SRO charged with adopting investor protection rules governing broker-dealers and banks that underwrite, trade and sell tax-exempt bonds, 529 college savings plans and other types of municipal securities.
The American Arbitration Association
American Arbitration Association
The American Arbitration Association is a private enterprise in the business of arbitration, and one of several arbitration organizations that administers arbitration proceedings. The AAA also administers mediation and other forms of alternative dispute resolution. It is headquartered in New York...
is also an SRO with official, statutory status.
Because of the prominence of the SROs in the securities industry, the term SRO is often used too narrowly to describe an organization authorized by statute or government agency to exercise control over a certain aspect of the industry.
The National Association of Realtors
National Association of Realtors
The National Association of Realtors , whose members are known as Realtors, is North America's largest trade association. representing over 1.2 million members , including NAR's institutes, societies, and councils, involved in all aspects of the residential and commercial real estate industries...
(NAR) is an example of an SRO that fills the vacuum left by the absence of government oversight or regulation. The NAR sets the rules for Multiple Listing Service
Multiple Listing Service
A multiple listing service is a suite of services that enables real estate brokers to establish contractual offers of compensation , facilitates cooperation with other broker participants, accumulates and disseminates information to enable appraisals, and is a facility for the orderly...
s and how brokers use them. Another example is the American Medical Association
American Medical Association
The American Medical Association , founded in 1847 and incorporated in 1897, is the largest association of medical doctors and medical students in the United States.-Scope and operations:...
which sets rules for ethics, conflicts, disciplinary action, and accreditation in medicine.