Self-Regulatory Organization - SRO
Categories: Ethics/Morals, Regulations, Board of Directors
These are self-policing organizations that regulate their own members. Examples? FINRA, the National Association of Securities Dealers in the United States, NYSE, and AMEX.
And no, it’s not Standing Room Only. SRO. SRO me the money! Well, yeah, it's something like that. So here’s the sitch. It’s 1927 and the headlines are riddled with stories of city slickers gettin’ rich on Wall Street, investing in things poor Farmer Joe never heard of, and couldn’t spell, even if he tried.
And wheat ain’t one of the things Beauregard is investing in. So along comes Farmer Joe at just the wrong time, literally betting the farm on Velcro parachutes, only to go bankrupt after the market crash. And multiple physical, human crashes that followed.
Then came the various 1933, ‘34 and other Acts, all of which tried to further legislate fair n’ square dealing in the investing world in the U.S. If you were investing outside of the U.S., well...you were on your own.
One of the things that came along was the SEC - the Securities and Exchange Commission, which was given powers to regulate and pursue bad dealers. Stock brokers bore the brunt of much blame for unfair or bad selling practices to the ignorant, the unqualified, the...farmer-tanned.
And in reality, many of them were bad actors, even worse than Keanu Reeves. But the brokerage industry realized quickly that it would be dead on its own, or at least regulated to death if it didn't step up and manage its own people.
So along came a variety of SROs, or self-regulatory organizations, which lived ostensibly outside of the direct control of the legislative bodies behind them. And in a strange way, they are vastly more effective.
Why? Because stock brokers know how other stock brokers cheat. Catching the bad eggs is a whole lot easier when you’re putting them into your basket, rather than into your, uh, hula hoop.
Today, FINRA is the largest and most pervasive SRO, and it manages myriad elements of Wall Street and the investing world in America. If you’re dying to learn more about FINRA, we’ve got you covered. We can, uh…SRO you the video…