FINRA Launches Targeted Exam of BDs' Crypto Asset Communications

By Melanie Waddell

News November 16, 2022 at 02:13 PM

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The Financial Industry Regulatory Authority is conducting a targeted exam of broker-dealer practices regarding retail communications on crypto asset products and services.

Unless otherwise noted, FINRA states that the relevant period for each request is July 1, 2022 through Sept. 30, 2022.

FINRA is asking firms to provide, for instance, "all retail communications that were distributed or made available by the firm or its affiliate(s) on its behalf that refer to, relate to, or concern a Crypto Asset or a service involving the transaction or holding of a Crypto Asset."

A crypto asset, FINRA states, includes an asset "that is issued or transferred using distributed ledger or blockchain technology, including, but not limited to, so-called 'virtual currencies,' 'coins,' and 'tokens,'" and may or may not meet the definition of a "security" under the federal securities laws.

Retail communication includes "any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period," FINRA states, and also includes video, social media, mobile applications and websites.

FINRA is also asking firms to identify whether or not the communication was filed with FINRA's Advertising Regulation Department, and if each communication was approved by a registered principal of the firm.

Other requests include:

Providing the firm's written supervisory procedures concerning the review, approval, recordkeeping and dissemination of communications in effect for any portion of the relevant period.
Providing any compliance policies, manuals, training materials, compliance bulletins, and any other written guidance in effect for any portion of the relevant period concerning communications.

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