The Securities and Exchange Commission has authority over broad aspects of the securities industry. They are granted this authority under the Securities Exchange Act of 1934. Under this landmark securities legislation the SEC requires securities exchanges such as NYSE and CBOE to register. These self-regulatory organizations in turn register and regulate their own member firms and the associated persons of those firms.
Securities have long traded both on the New York Stock Exchange and the Over¬The-Counter (OTC) market. In 1938 Congress passed the Maloney Act, a law providing for the regulation of the OTC securities markets through national associations registered with the SEC. The National Association of Securities Dealers (NASD) then registered under the act. In 2007 the NASD and the regulatory arm of the NYSE formed FINRA, which stands for the Financial Industry Regulatory Authority. FINRA, along with NYSE and CBOE, is a self-regulatory organization (SRO) registered with the SEC under the Securities Exchange Act of 1934.
FINRA is organized along four major bylaws:
•    rules of fair practice
•    uniform practice code
•    code of procedure
•    code of arbitration
The rules of fair practice describe how to deal with customers. Commissions, mark¬ups, recommendations, advertising, sales literature, etc., are covered here. These are often referred to as "member conduct rules." The uniform practice code is the code that keeps the practice uniform. Settlement dates, delivery of securities, the establish¬ment of the ex-date, ACAT transfers, etc. are covered here. The exam might refer to the uniform practice code as "promoting cooperative effort" among member firms.


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