Summary
A review by the Financial Industry Regulatory Authority (FINRA) found that around 70% of crypto communications from firms potentially violate investor protection guidelines. The review focused on compliance with FINRA Rule 2210, which prohibits false, exaggerated, or misleading claims and the omission of important facts. The violations included failure to differentiate between crypto assets offered by the firm and those provided by affiliates or third parties, as well as false statements implying that crypto assets function like cash. FINRA’s analysis does not create new legal requirements but poses questions for firms to consider when reviewing and supervising their communications about crypto assets. The regulator has previously issued warnings about the risks associated with self-directed Individual Retirement Accounts investing in crypto assets. The United Kingdom’s Financial Conduct Authority has also recently increased efforts to ensure that crypto firms marketing to UK customers comply with regulations.
Key Points
1. A review by the Financial Industry Regulatory Authority (FINRA) found that approximately 70% of firms’ crypto communications potentially violate investor protection guidelines.
2. The review focused on compliance with FINRA Rule 2210, which prohibits false, exaggerated, misleading claims and the omission of important facts that could mislead investors.
3. Violations of the regulation included failure to differentiate between different types of crypto assets offered, false statements or implications about the functionality of crypto assets, and misleading communications to retail investors.