Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What does SRO stand for in the financial industry?

1. Standard Rate Organization

2. Self-Regulatory Organization

3. Specialized Resource Office

4. Securities Regulation Office

The correct answer is: Self-Regulatory Organization

SRO stands for Self-Regulatory Organization in the financial industry. These organizations play a crucial role in overseeing and regulating their members to ensure compliance with financial laws, regulations, and industry standards. They help to maintain market integrity and protect investors by setting rules and standards for conduct, providing guidance, and enforcing compliance among their members. SROs operate independently of the government and often have the authority to impose disciplinary actions against members that fail to adhere to the established rules. Examples of SROs include the Financial Industry Regulatory Authority (FINRA) and the National Futures Association (NFA). Their existence helps bridge the gap between public regulatory bodies and the financial firms, fostering a self-regulation environment that promotes ethical behavior in the industry. The other options do not accurately reflect the term's meaning in the financial context. For instance, "Standard Rate Organization" and "Specialized Resource Office" misrepresent the regulatory and oversight nature of SROs, while "Securities Regulation Office" suggests a more governmental function rather than the self-regulatory aspect inherent to SROs.