Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What is the primary responsibility of a Self-Regulatory Organization (SRO)?

To enact laws related to market trading
To manage investor education programs
To maintain fair and orderly securities markets
To represent investors in securities transactions

The correct answer is: To maintain fair and orderly securities markets

The primary responsibility of a Self-Regulatory Organization (SRO) is to maintain fair and orderly securities markets. This role involves establishing rules and regulations for its members to ensure ethical practices, transparency, and compliance with existing laws. SROs, such as the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB), play a crucial part in overseeing the conduct of brokers and dealers and enforcing regulations that protect investors and maintain market integrity. While managing investor education programs and representing investors in transactions are important functions, they are not the primary directive of an SRO. Enacting laws is typically the responsibility of government agencies and legislative bodies, rather than the SROs themselves, which operate within the framework of the laws established by those entities. Thus, the focus of an SRO centers on regulation and oversight to foster a reliable trading environment.