{"id":21218,"date":"2023-02-06T13:59:12","date_gmt":"2023-02-06T13:59:12","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=21218"},"modified":"2026-06-03T20:18:05","modified_gmt":"2026-06-03T20:18:05","slug":"uses-of-self-regulation","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/","title":{"rendered":"Uses of Self-regulation"},"content":{"rendered":"<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"QAPage\",\r\n  \"mainEntity\": {\r\n    \"@type\": \"Question\",\r\n    \"name\": \"What type of regulatory body is granted authority by the government but finances itself?\",\r\n    \"text\": \"A leading newspaper reports on a regulatory institution that has been granted autonomy by the government and empowered by statute. However, the regulatory body is not financed by the government. The regulatory body is most likely a: A. Independent regulator. B. Government agency. C. Self-regulatory organization.\",\r\n    \"answerCount\": 3,\r\n    \"suggestedAnswer\": [\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"A. Independent regulator.\"\r\n      },\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"B. Government agency.\"\r\n      },\r\n      {\r\n        \"@type\": \"Answer\",\r\n        \"text\": \"C. Self-regulatory organization.\"\r\n      }\r\n    ],\r\n    \"acceptedAnswer\": {\r\n      \"@type\": \"Answer\",\r\n      \"text\": \"The correct answer is C. A self-regulatory organization (SRO) is granted authority by the government and derives its powers from statutory provisions, but it finances its operations independently, typically through fees collected from the firms or entities it regulates. Unlike government agencies, SROs do not rely on government funding while still carrying out regulatory responsibilities within their designated industries.\"\r\n    },\r\n    \"author\": {\r\n      \"@type\": \"Organization\",\r\n      \"name\": \"AnalystPrep\"\r\n    }\r\n  }\r\n}\r\n<\/script>\r\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/GNHvprzqFA4\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\r\n\r\n<p>Self-regulatory bodies exist in industries such as financial markets. These regulatory bodies are commonly known as <strong>self-regulating organizations<\/strong> (SROs). SROs are non-governmental organizations that possess the authority to create and implement independent industry and professional regulations and standards.<\/p>\r\n<p>Unlike the case of standard market self-regulatory bodies, government departments and agencies recognize and empower SROs. They, as such, have the capacity to deliver in their mandate. Note, however, that they are independent and do not rely on government funding. An example of an SRO is the Financial Regulatory Authority (FINRA) in the US, which enforces rules and federal securities rules.<\/p>\r\n<div style=\"margin: 18px 0;\"><a style=\"display: block; text-align: center; padding: 14px 18px; border: 2px solid #2F5BFF; border-radius: 18px; color: #ffffff; font-weight: 600; font-size: 16px; text-decoration: none; background-color: #1a73e8;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\">Strengthen your CFA Level II self-regulation concepts with our Free Trial.<\/a><\/div>\r\n\r\n<h2>Role of SROs<\/h2>\r\n<p>The purposes of SROs vary from one country to another. In some countries, such as the US, SROs have regulatory power, while in some other countries, they are rarely recognized as independent regulators. In fact, in some countries, they are non-existent. Although SROs are private organizations, they are not insulated from government-imposed regulations.<\/p>\r\n<p>Some of the functions of SRO include:<\/p>\r\n<ol>\r\n\t<li>SROs act as a watchdog to protect against fraud or unethical practices by market participants.<\/li>\r\n\t<li>Some SROs come up with conditions that must be met to be a member, such as having a specific educational background.<\/li>\r\n\t<li>They educate market players on the appropriate business practices. For example, an SRO may assist investors by providing information on how investments work and guiding them on the methods of reducing risks related to financial markets.<\/li>\r\n<\/ol>\r\n<blockquote style=\"font: normal;\">\r\n<h2>Question<\/h2>\r\n<p>The leading newspaper in a country reports on a regulatory institution that has been granted autonomy by the government and further empowered by a statute. However, the regulatory body is not financed by the government. The regulatory body reported by the media is <em>most likely<\/em> to be a (an):<\/p>\r\n<ol style=\"list-style-type: upper-alpha;\" type=\"A\">\r\n\t<li>Independent regulator.<\/li>\r\n\t<li>Government agency.<\/li>\r\n\t<li>Self-regulatory organization.<\/li>\r\n<\/ol>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is C<\/strong>.<\/p>\r\n<p>Self-regulators are given authority by the government and are provided power by statutes. They, however, finance themselves (from the money collected from the companies they regulate).<\/p>\r\n<\/blockquote>\r\n<p>Reading 10: Economics of Regulation<\/p>\r\n<p><em>LOS 10 (e) Describe uses of self-regulation in financial markets.<\/em><\/p>\r\n\r\n\r\n<div style=\"text-align: center; margin: 30px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"> Start Free Trial \u2192 <\/a><p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">Access CFA Level II ethics study notes, practice questions, mock exams, and video lessons to strengthen your understanding of self-regulation and its role in professional standards.<\/p><\/div>\r\n","protected":false},"excerpt":{"rendered":"<p>Self-regulatory bodies exist in industries such as financial markets. These regulatory bodies are commonly known as self-regulating organizations (SROs). SROs are non-governmental organizations that possess the authority to create and implement independent industry and professional regulations and standards. Unlike the&#8230;<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,494],"tags":[216,502,538,542],"class_list":["post-21218","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-economics","tag-cfa-level-2","tag-economics","tag-reading-12-economics-of-regulation","tag-uses-of-self-regulation","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Uses of Self-Regulation | AnalystPrep<\/title>\n<meta name=\"description\" content=\"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Uses of Self-Regulation | AnalystPrep\" \/>\n<meta property=\"og:description\" content=\"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/\" \/>\n<meta property=\"og:site_name\" content=\"CFA, FRM, and Actuarial Exams Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2023-02-06T13:59:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-06-03T20:18:05+00:00\" \/>\n<meta name=\"author\" content=\"AnalystPrep Team\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"AnalystPrep Team\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/\"},\"author\":{\"name\":\"AnalystPrep Team\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/ed0c939f3f12a02c5a193708b713d89e\"},\"headline\":\"Uses of Self-regulation\",\"datePublished\":\"2023-02-06T13:59:12+00:00\",\"dateModified\":\"2026-06-03T20:18:05+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/\"},\"wordCount\":378,\"keywords\":[\"CFA-level-2\",\"Economics\",\"Reading 12: Economics of Regulation\",\"Uses of Self-regulation\"],\"articleSection\":[\"CFA Level II Study Notes\",\"Economics\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/\",\"name\":\"Uses of Self-Regulation | AnalystPrep\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\"},\"datePublished\":\"2023-02-06T13:59:12+00:00\",\"dateModified\":\"2026-06-03T20:18:05+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/ed0c939f3f12a02c5a193708b713d89e\"},\"description\":\"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/uses-of-self-regulation\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Uses of Self-regulation\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\",\"name\":\"CFA, FRM, and Actuarial Exams Study Notes\",\"description\":\"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/ed0c939f3f12a02c5a193708b713d89e\",\"name\":\"AnalystPrep Team\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g\",\"caption\":\"AnalystPrep Team\"},\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/author\\\/analystprep-team\\\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/GNHvprzqFA4\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"1783\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2023-02-06T13:59:12+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Uses of Self-Regulation | AnalystPrep","description":"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/","og_locale":"en_US","og_type":"article","og_title":"Uses of Self-Regulation | AnalystPrep","og_description":"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.","og_url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/","og_site_name":"CFA, FRM, and Actuarial Exams Study Notes","article_published_time":"2023-02-06T13:59:12+00:00","article_modified_time":"2026-06-03T20:18:05+00:00","author":"AnalystPrep Team","twitter_card":"summary_large_image","twitter_misc":{"Written by":"AnalystPrep Team","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/"},"author":{"name":"AnalystPrep Team","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/ed0c939f3f12a02c5a193708b713d89e"},"headline":"Uses of Self-regulation","datePublished":"2023-02-06T13:59:12+00:00","dateModified":"2026-06-03T20:18:05+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/"},"wordCount":378,"keywords":["CFA-level-2","Economics","Reading 12: Economics of Regulation","Uses of Self-regulation"],"articleSection":["CFA Level II Study Notes","Economics"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/","url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/","name":"Uses of Self-Regulation | AnalystPrep","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/#website"},"datePublished":"2023-02-06T13:59:12+00:00","dateModified":"2026-06-03T20:18:05+00:00","author":{"@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/ed0c939f3f12a02c5a193708b713d89e"},"description":"Learn how self-regulatory organizations (SROs) promote market integrity, enforce standards, and protect investors from misconduct.","breadcrumb":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/uses-of-self-regulation\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/study-notes\/"},{"@type":"ListItem","position":2,"name":"Uses of Self-regulation"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/study-notes\/#website","url":"https:\/\/analystprep.com\/study-notes\/","name":"CFA, FRM, and Actuarial Exams Study Notes","description":"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/study-notes\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/ed0c939f3f12a02c5a193708b713d89e","name":"AnalystPrep Team","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/0828fe7fdfdcf636b2061b4c563e20cc9b7453f7cd1641b4c43edbfba896727a?s=96&d=mm&r=g","caption":"AnalystPrep Team"},"url":"https:\/\/analystprep.com\/study-notes\/author\/analystprep-team\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/GNHvprzqFA4","og_video_type":"text\/html","og_video_duration":"1783","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2023-02-06T13:59:12+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/21218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/comments?post=21218"}],"version-history":[{"count":20,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/21218\/revisions"}],"predecessor-version":[{"id":43817,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/21218\/revisions\/43817"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/media?parent=21218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/categories?post=21218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/tags?post=21218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}