A more thorough explanation:

A Self Regulatory Organization (SRO) is a group that regulates its own industry under the watchful eye of the Securities and Exchange Commission (SEC). The SEC sets the standards and objectives for the SRO's rules, which must prevent fraud and market manipulation, promote fair trade, and provide disciplinary actions against members who violate federal securities law. SROs also address fee structures for brokers.

For example, the New York Stock Exchange (NYSE) and the Financial Industry Regulatory Authority (FINRA) are both SROs. The NYSE has rules that apply to any market participant who trades on that stock exchange, while FINRA provides a single forum where investors can seek arbitration for claims that they have against broker-dealer firms and the firms’ employees.

The SEC has the power to ensure that the SROs fulfill their regulatory responsibilities on an ongoing basis. If an SRO violates rules of good practice and fails to police and discipline their members, the SEC can take enforcement actions against them. However, the SEC rarely reverses SRO’s disciplinary actions.