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Your Guide to Understanding Financial Regulation

As a financial advisor, it is important to stay up-to-date on the latest financial regulations. There are many different regulators and agencies that you need to be aware of, including the Department of the Treasury/IRS, State regulators (e.g., NASAA), The Federal Reserve, Securities Investor Protection Corporation (SIPC), and Federal Deposit Insurance Corporation (FDIC). In this blog post, we will provide an overview of each of these organizations and explain their role in financial regulation.

Department of the Treasury/IRS:

The Department of the Treasury is responsible for developing and implementing policies related to taxation, financial markets, and other economic issues. In addition, it houses the Internal Revenue Service (IRS), which is responsible for administering and enforcing tax laws in the US. For example, the IRS conducts SIE exams to ensure that financial advisors are following all relevant regulations and requirements when providing investment advice to clients.

State regulators:

State regulators such as NASAA play an important role in overseeing activities within the financial industry. NASAA is the North American Securities Administrators Association, which is a non-profit organization dedicated to protecting investors and promoting market integrity. They work closely with state regulators from across the country to develop and enforce regulations that govern areas such as securities offerings, broker-dealers, investment advisors, and other financial services. Other state regulators may include the state insurance department, which is responsible for regulating activities related to the insurance industry.

The Federal Reserve:

As one of the main regulatory bodies overseeing the financial industry, the Federal Reserve has a number of functions, including setting interest rates, supervising banks, and providing liquidity during periods of crisis. It also plays a crucial role in SIPC, the Securities Investor Protection Corporation, which helps protect investors against losses resulting from bankruptcies or fraud. The Federal Reserve typically appoints SIPC board members, who then work to ensure that SIPC is fulfilling its mission and protecting the rights of investors.

Securities Investor Protection Corporation (SIPC):

SIPC is a non-profit organization that aims to protect customers of SROs, or self-regulatory organizations, such as stock exchanges and brokerage firms. They might do this by providing advances to customers or by facilitating the SRO’s liquidation of the customer’s account. SIPC works closely with agencies like the Federal Reserve, which assist SIPC in meeting its goals. SIPC provides coverage for up to $500,000 in securities and cash held by an SRO member firm.

Federal Deposit Insurance Corporation (FDIC):

The FDIC is a government agency that provides insurance to bank deposits up to $250,000 per account. This protects bank depositors from losing their funds due to bankruptcy or insolvency of their bank. As a financial advisor, it is important to be familiar with these key financial regulators and how they work together to ensure a safe and stable financial market for investors.

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