Getting Their Priorities Straight: FINRA and MSRB

By Abigail Howd, Spring 2018 IAC Student Intern

In 2010, DJ Khaled shared his theme song, “All I do is win, win, win, no matter what. Got money on my mind, I can never get enough.”  While most of us can say we have money on our minds, we probably cannot truthfully say that all we do is win, no matter what.  That is where the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) come in.  Both organizations protect investors from fraud so they can win no matter what in the capital market.  That is why the SEC’s Office of Compliance Inspections and Examinations (OCIE) added FINRA and MSRB to its 2018 examinations priority list

FINRA and MSRB are both self-regulating organizations authorized by Congress and overseen by the SEC.  Self-regulating organizations create and enforce their own rules, and the organizations’ members must comply with the rules.  FINRA and MSRB are also both not-for-profit organizations that, while created by the government, are not part of the government.  Both organizations have similar registration requirements for participants in their prospective industries with similar compliance rules.

FINRA regulates broker-dealers, administers qualification exams for registered persons, educates investors, and provides a forum for securities arbitration.  When FINRA discovers misconduct, it can bring disciplinary actions in the form of fines or license-revocation.  Brokerage firms and representatives must register with FINRA and abide by FINRA’s rules.

MSRB regulates municipal advisors and broker-dealers who buy, sell, and underwrite municipal securities.  Municipal securities are “bonds issued by states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for the public good.”  All firms that handle municipal security business must register with MSRB and comply with the MSRB’s rules.

The OCIE plans to examine both organizations throughout the year.  The OCIE will review FINRA’s operations, regulatory programs, and examinations of registered broker-dealers, and the OCIE review the MSRB’s operations and policies.  Both of the organizations play a big role in the securities industry.  By overseeing the policies and procedures FINRA and MSRB have in place, the OCIE continues to improve both organizations and protect investors.