The SEC, FINRA, the PCAOB and Dodd-Frank are often mentioned together, but they do different jobs. Knowing which body oversees a company, a broker-dealer or an audit firm, and where Dodd-Frank fits, shows which rules apply to whom.

US financial and audit regulators at a glance

US financial and audit regulators are the bodies and laws that oversee securities markets, broker-dealers and public company audits. The SEC is the federal regulator of the securities industry. FINRA supervises member broker-dealers under SEC oversight. The PCAOB oversees audits of public companies. Dodd-Frank is not a regulator. It is the 2010 federal law that reshaped parts of US financial regulation and gave the SEC and the PCAOB new work.

SEC, FINRA, PCAOB and Dodd-Frank compared

Body or law What it is Who it covers What it does
SEC Federal regulator that Congress created through the Securities Exchange Act of 1934 Companies offering securities to the public and the broker-dealers, investment advisers and exchanges that sell and trade them Enforces the federal securities laws and requires registration and periodic reporting
FINRA Private not-for-profit self-regulatory organization (SRO) Member broker-dealers and their representatives Writes and enforces rules, examines member firms and administers qualification exams
PCAOB Nonprofit corporation established by Congress Registered public accounting firms that audit public companies and SEC-registered broker-dealers Registers firms, sets auditing standards, inspects audits and disciplines firms
Dodd-Frank Federal law (Public Law 111-203) signed on July 21, 2010 Areas including consumer protection, trading restrictions, credit ratings and regulation of financial products Reshaped parts of the US regulatory system and directed new rulemaking

What is the SEC?

The SEC (the US Securities and Exchange Commission) is the federal regulator of the US securities industry. The SEC says its mission is protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation. It was founded in 1934.

The federal securities laws rest on a simple idea: everyone should be treated fairly and have access to certain facts about investments and those who sell them. The SEC's statutes and regulations page lists the main laws it works under, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Exchange Act created the SEC and gave it broad authority over all aspects of the securities industry.

What is SEC compliance?

SEC compliance is meeting the obligations that federal securities laws and SEC rules place on the companies and firms the SEC regulates. The obligations depend on the type of organization. From the SEC's own pages:

  • Securities sold in the US must in general be registered. Registration forms call for a description of the company's properties and business, a description of the security, information about management and financial statements certified by independent accountants.
  • The Exchange Act empowers the SEC to require periodic reporting by companies with publicly traded securities. Registration statements and prospectuses become public shortly after filing and are available on the SEC's EDGAR database.
  • The Exchange Act requires a variety of market participants to register with the SEC, including exchanges, brokers and dealers, transfer agents and clearing agencies.

Internal control rules

Under SEC rule 17 CFR 240.13a-15, covered issuers must maintain disclosure controls and procedures and evaluate them each fiscal quarter (each fiscal year for foreign private issuers). Management must also evaluate internal control over financial reporting each fiscal year, using "a suitable, recognized control framework that is established by a body or group that has followed due-process procedures, including the broad distribution of the framework for public comment". The rule does not name a specific framework.

What is FINRA?

FINRA, the Financial Industry Regulatory Authority, is a private not-for-profit self-regulatory organization (SRO) that supervises its member broker-dealers. FINRA says it is responsible under federal law for supervising its member firms and that its mission is to protect investors and safeguard the integrity of capital markets.

What FINRA does

FINRA carries out its mission by:

  • writing and enforcing rules that govern the activities of member firms and their representatives
  • examining member firms to ensure compliance with federal law and FINRA's rules
  • administering qualification exams to ensure anyone who sells a securities product is qualified and licensed to do so
  • operating a dispute resolution forum for investors, member firms and their representatives

Is FINRA part of the government?

FINRA is not part of the government. It is funded by member fees and not taxpayer dollars. It is registered with the SEC and performs its work under the SEC's supervision. FINRA also says its rules are subject to review and approval by the SEC, generally following a public comment period. The Exchange Act requires SROs to create rules that allow for disciplining members for improper conduct.

What is the PCAOB?

The PCAOB (the Public Company Accounting Oversight Board) is a nonprofit corporation established by Congress to oversee the audits of public companies. The PCAOB says its purpose is to protect investors and further the public interest in the preparation of informative, accurate and independent audit reports. It also oversees the audits of brokers and dealers registered with the SEC. The Sarbanes-Oxley Act of 2002 created the PCAOB.

PCAOB duties

The PCAOB has four primary duties:

  • register public accounting firms that prepare audit reports for issuers and SEC-registered brokers and dealers
  • establish or adopt auditing and related attestation, quality control, ethics and independence standards
  • inspect registered public accounting firms' audits and quality control systems
  • investigate and discipline registered public accounting firms and their associated persons for violations of specified laws, rules or professional standards

Inspections, standards and SEC oversight

The PCAOB's inspections page says it provides each inspected firm with issuer audit clients with a report that summarizes any deficiencies identified. Its standards page lists auditing standards, attestation standards and quality control standards alongside ethics and independence rules. The SEC has oversight authority over the PCAOB, including approval of the Board's rules, standards and budget. Ideagen has covered the PCAOB's standards and findings in Audit quality & QC1000: navigating PCAOB's QC1000 standard, PCAOB postpones QC1000 implementation and PCAOB continues the focus on critical audit matters.

What is Dodd-Frank?

Dodd-Frank is the Dodd-Frank Wall Street Reform and Consumer Protection Act, a federal law signed on July 21, 2010. The SEC says the law set out to reshape the US regulatory system in areas including consumer protection, trading restrictions, credit ratings and regulation of financial products. Congress.gov lists it as Public Law 111-203.

What Dodd-Frank did

Parts of the law set up or changed regulators and rules, according to the Congress.gov summary of the law:

  • Title I established the Financial Stability Oversight Council.
  • Title II set out an Orderly Liquidation Authority for financial companies.
  • Title X established an independent Bureau of Consumer Financial Protection in the Federal Reserve System to regulate consumer financial products or services under federal consumer financial laws.
  • Section 619, known as the Volcker Rule, prohibits a banking entity from engaging in proprietary trading and from acquiring or retaining an ownership interest in or sponsoring a hedge fund or a private equity fund.
  • Section 982 extended coverage of PCAOB auditing authority to all companies subject to the securities laws and not only public companies.

The SEC has adopted final rules for many Dodd-Frank provisions. Its implementation page groups them by area, including private funds, executive compensation and security-based swaps.

The SEC oversees FINRA and the PCAOB, and Dodd-Frank shaped the rules

The SEC is the federal regulator of the US securities industry, and it requires registration and periodic reporting from companies that offer securities to the public. FINRA is a self-regulatory organization that supervises member broker-dealers under the SEC's oversight. The PCAOB registers and inspects the firms that audit public companies and SEC-registered broker-dealers, and the SEC approves its rules, standards and budget. Dodd-Frank is the 2010 law behind parts of this system, not a regulator. It gave the SEC rulemaking work and extended PCAOB auditing authority to all companies subject to the securities laws.

Ideagen Audit Analytics tracks SEC comment letters, PCAOB inspections and enforcement actions across jurisdictions. It is part of Ideagen's audit intelligence solution, which brings together 70+ verified databases for audit and compliance teams.