SHOULD SECURITIES INDUSTRY SELF-REGULATORY ORGANIZATIONS BE CONSIDERED GOVERNMENT AGENCIES?
by Roberta S. Karmel, Centennial Professor, Brooklyn Law School Securities industry self-regulatory organizations (SROs) began as private sector membership organizations of securities industry professionals. This article addresses the questions of whether, and to what extent, securities industry SROs have become government agencies, and whether, and to what extent, they should be subject to constitutional and statutory controls on government agencies. It focuses principally on the Financial Industry Regulatory Agency (FINRA), a new entity which combined the National Association of Securities Dealers, Inc. (NASD) and the member regulation functions of NYSE Group, Inc. (NYSE). The cases addressing these critical issues are contradictory, and generally not based on any overriding constitutional law principles. In some areas, the courts have just stated that an SRO is exercising delegated governmental power. In other areas, the courts have just stated that an SRO is a private membership or
Karmel, Centennial Professor, Brooklyn Law School Securities industry self-regulatory organizations (“SROs”) began as private sector membership organizations of securities industry professionals. This article addresses the questions of whether, and to what extent, securities industry SROs have become government agencies, and whether, and to what extent, they should be subject to constitutional and statutory controls on government agencies. It focuses principally on the Financial Industry Regulatory Agency (“FINRA”), a new entity which combined the National Association of Securities Dealers, Inc. (“NASD”) and the member regulation functions of NYSE Group, Inc. (“NYSE”). The cases addressing these critical issues are contradictory, and generally not based on any overriding constitutional law principles. In some areas, the courts have just stated that an SRO is exercising delegated governmental power. In other areas, the courts have just stated that an SRO is a private membership organiza
