Securities Trader Representative (Series 57) Practice Exam

The main objective of a self-regulatory organization (SRO) is to manage and apply industry regulations independently. SROs play a crucial role in maintaining the integrity of financial markets by establishing rules and standards for firms and individuals within the industry. They are empowered to create and enforce compliance standards, conduct audits, and handle disciplinary actions against members who violate regulations.

This independent regulatory function helps ensure that market participants adhere to ethical and professional standards, promoting fairness and transparency in trading activities. SROs also provide a platform for industry participants to voice their concerns and potentially influence the development of regulations that impact their operations.

The other choices do not accurately reflect the primary role of an SRO. Non-binding guidelines would lack the enforcement capability that SROs possess. Direct government oversight is not the function of an SRO, as these organizations operate independently but often coordinate with governmental regulatory bodies. Lastly, eliminating competition contradicts the fundamental principles of free markets that SROs are designed to uphold, which include healthy competition among firms to benefit investors and consumers.