What are Self-Regulatory Organisations (SROs)?

About Self-Regulatory Organizations (SROs):

• An SRO, is generally a non-governmental entitycreated by members of a particular industry or sector to help govern the companies in that industry.
• An SRO sets and enforces rules and standards relating to the conduct of entities in the industry (members) with the aim of protecting the customer and promoting ethics, equality, and professionalism.
• SROs typically collaborate with all stakeholders in framing rules and regulations.
• Their self-regulatory processes are administered through impartial mechanisms such that members operate in a disciplined environment and accept penal actions by the SRO.
• An SRO is expected to address concerns beyond the narrow self-interestsof the industry, such as to protect workers, customers, or other participants in the ecosystem.
• Although SROs are private organizations, they are still subject to government-imposed regulation to a degree. However, the government does delegatesome aspects of the industry oversight to SROs.
• Since the SRO has some regulatory influence over an industry or profession, it can often serve as a watchdog to guard against fraud or unprofessional practices.
• The ability of an SRO to exercise regulatory authoritydoes not stem from a grant of power from the government.
  • Instead, SROs often accomplish control through internal mechanisms that regulate the flow of business operations.
  • The authority may also come from an external agreement between businesses.
• The purpose of these organizations is to govern from within while avoiding tiesto a country's governance.

Q1: What are Financial Markets?

Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives. Financial markets facilitate the interaction between those who need capital with those who have capital to invest. In addition to making it possible to raise capital, financial markets allow participants to transfer risk (generally through derivatives) and promote commerce.

Source: Framework for financial market Self-Regulatory Organisations released by RBI