Various groups monitor brokerage firms, employees

This article was provided by Timothy M. Reese, senior vice president investments with A.G. Edwards & Sons Inc.

In today's media and market climate, many investors may be wondering who looks out for their interests when it comes to matters that could affect their investments.

While most people are aware of the finance industry's primary regulator, the Securities and Exchange Commission, there are several other entities known as Self-Regulatory Organizations that are charged with the responsibility of ensuring the orderly and efficient governance of the country's securities markets.

These organizations, which are overseen by the SEC, monitor brokerages firms, brokerage employees and the security exchanges on an ongoing basis. Here are some of the more familiar SROs and their oversight responsibilities.

Municipal Securities Rulemaking Board This organization regulates securities firms and banks involved in the underwriting, trading and selling of municipal securities.

Municipal securities are financial instruments, typically bonds, which are issued to finance public projects.

The board, which comprises representatives from securities firms, bank dealers and members of the public, develops industry rules and standards for brokers, banks and securities dealers who conduct municipal securities business. The board does not, however, have the authority to make rules for municipal issuers or investors.

The National Association of Securities Dealers enforces the rules made by the MSRB pertaining to securities firms. The Federal Deposit Insurance Corporation, the Federal Reserve Board and the Comptroller of the Currency enforce the rules for banks.

National Association of Securities Dealers Inc. Created to monitor and standardize the ethics and practices involved in securities trading, the NASD regulates the activities of registered securities professionals and securities firms. It also monitors all trading on the NASDAQ Stock Market and other selected markets nationwide.

Because it must oversee the policies and practices of member firms and personnel, the NASD inspects its member firms every one to four years to ensure the member firms' books are in order and that the company and its representatives are dealing fairly with customers. During an examination, the NASD reviews its members for compliance with its own rules and regulations, and the regulations of other organizations such as the MSRB.

In addition, the NASD ensures adherence to anti-fraud provisions, advertising rules and the extension of credit to customers, as well as acting as a mediator in disputes between member firms or between a member firm and one of its customers.

New York Stock Exchange When many people think of the New York Stock Exchange, they think of a place where traders hustle about a floor buying and selling stocks. But many don't realize that the NYSE also functions as an SRO by supervising the listing of securities, the transfer of seats and the qualifications of specialists.

The NYSE, like the NASD, scrutinizes member firms annually to ensure compliance with its rules and regulations, and also requires member companies to regularly file reports that include detailed financial and operational information.

SROs work in concert with the SEC to protect investors and their financial interests by developing, implementing and enforcing rules and regulations to ensure the operational integrity of the financial markets and the securities industry.

The SROs mentioned here are just a few of the most widely recognized. Your financial consultant can provide you with more information about the organizations that are working to protect you and your investments.