Market Regulation: Self-Regulatory Organizations: 

SRO Operations 

 

SRO Separate Operations

Position: SROs should separate their regulatory and market operations.

Rationale: Combing both functions under one structure raises concerns about conflicts of interest. Also, increased global and domestic market competition, combined with shrinking numbers of SRO members that account for an ever-increasing percentage of revenues for the SRO, raises the risk that important regulatory safeguards will not be as stringent or applied consistently as situations may warrant.

Where stated: Centre - SEC SROs (PDF)

 

SRO Separate Funds

Position: SROs should use funds collected from regulatory fees, fines, and penalties solely to support regulatory operations and programs.

Rationale: Separating funds between regulatory and commercial use by the SRO will ensure that the influence of interested parties on regulatory actions is reduced; and that such funds will not be used to pay dividends or other shareholder distributions.

Where stated: Centre - SEC SROs (PDF)

 

SRO Ownership and Control

Position: SROs should limit any party, including broker dealers and other firms, to 20% ownership and voting interests.

Rationale: Concentration of SRO ownership can lead to conflicts of interest resulting from an interested party using its influence to affect disciplinary decisions.

Where stated: Centre - SEC SROs (PDF)

 

SRO Reporting Requirements

Position: SROs should update national regulators regularly with relevant information on their operations, including governance and regulatory programs.

Rationale: Such disclosures will increase the accountability of SROs and provide the marketplace with helpful information.

Where stated: Centre - SEC SROs (PDF)

 

SRO Self-Listing

Position: SROs which self-list their own securities or list any other regulated trading facilities should adhere to strict listing and on-going reporting rules, including approval of the SROs’ independent Regulatory Oversight Committee.

Rationale: The disclosures will expose and eliminate preferential treatment afforded by the SROs in the listing and trading of securities of affiliated entities. Subjecting the listings to approval of the oversight committee will ensure that conflicts of interest are considered and dealt with in an appropriate manner.

Where stated: Centre - SEC SROs (PDF)