U S Government Accountability Office

Securities regulation U S Government Accountability Office

"Why GAO Did This Study SEC oversees FINRA, which is charged with regulatory oversight of all securities broker-dealers conducting business with the public in the United States. In light of recent events in the financial markets, SEC and FINRA have faced questions about their oversight roles. The Dodd-Frank Wall Street Reform and Consumer Protection Act required GAO to study SEC's oversight of national securities associations registered under section 15A of the Securities Exchange Act of 1934, a provision which applies only to FINRA. This report examines (1) how SEC has conducted oversight of FINRA, including FINRA rule proposals and the effectiveness of its rules, and (2) how SEC plans to enhance its oversight of FINRA. To address these objectives, GAO reviewed SEC documentation, policies and procedures for inspections of FINRA and reviews of FINRA rule proposals; reviewed documentation on SEC's plans for enhanced FINRA oversight; and interviewed SEC and FINRA officials. What GAO Recommends SEC should encourage FINRA to conduct retrospective reviews of its rules and establish a process for examining FINRA's reviews, and SEC should follow all elements of a risk-management framework in developing its future oversight plans. SEC generally agreed with GAO's"