FINRA Publishes Crypto Asset Communications Industry Sweep Update

Written By Brandon Klerk

FINRA published its report regarding its industry sweep regarding (aka targeted examinations) crypto assets. FINRA has identified potential violations of FINRA Rule 2210 (Communications with the Public) in 70 percent of crypto asset communications it reviewed, according to a report it published.

FINRA’s Key Findings of the Sweep

The potential substantive violations of FINRA Rule 2210 include:

  • Failure to clearly differentiate in communications, including those on mobile apps, between crypto assets offered through an affiliate of the member or another third party, and products and services offered directly by the member itself;

  • False statements or implications that crypto assets functioned like cash or cash equivalent instruments;

  • Other false or misleading statements or claims regarding crypto assets;

  • Comparisons of crypto assets to other assets (e.g., stock investments or cash) without providing a sound basis to compare the varying features and risks of these investments;

  • Unclear and misleading explanations of how crypto assets work and their core features and risks;

  • Failure to provide a sound basis to evaluate crypto assets by omitting clear explanations of how crypto assets are issued, held, transferred or sold;

  • Misrepresenting that the protections of the federal securities laws or FINRA rules applied to the crypto assets; and

  • Misleading statements about the extent to which certain crypto assets are protected by the Securities Investor Protection Corporation under the Securities Investor Protection Act.

Read FINRA’s report here:

https://www.finra.org/rules-guidance/guidance/targeted-examination-letters/sweep-update-jan2024

Additional Resources

Brandon Klerk https://www.halyardcompliance.com
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