Around 70% of communications about cryptocurrencies by FINRA could potentially violate Rule 2210, which prohibits false or misleading statements.
The identified violations include ambiguity between the crypto assets offered by firms and those provided by third parties, as well as false claims about the nature of crypto assets.
FINRA emphasizes the importance of clarity and regulatory compliance in crypto advertising to ensure investor protection.
Recently, the Financial Industry Regulatory Authority (FINRA), a US regulatory body, conducted an in-depth analysis of communications related to cryptocurrencies among its members. The results are clear: approximately 70% of the communications analyzed could potentially violate key investor protection rules.
An analysis by FINRA takes on crypto advertising
The analysis, launched in November 2022, focused on compliance with FINRA Rule 2210. This rule aims to prevent misleading, exaggerated, or false claims in financial communications. It also prohibits the omission of facts that may deceive investors. According to FINRA’s findings, communications from approximately 500 entities analyzed had “substantial potential violations” of this regulation.
Identified infractions included companies failing to clearly distinguish crypto assets offered directly by them from those provided by affiliates or third parties. Some messages also conveyed false statements or implied that crypto assets functioned like cash.
FINRA follows SEC guidelines
Crypto assets may be securities offered without registration with the SEC or a valid exemption from registration, and may not be accompanied by complete or accurate information to help investors make informed decisions.
FINRA
FINRA has made it clear that this update does not create new legal or regulatory requirements or new interpretations of existing requirements. However, it reminds firms of their current obligations under federal securities laws and regulations. FINRA continues to follow the guidelines of the US Securities and Exchange Commission (SEC) in assessing the business lines proposed by firms regarding crypto asset securities.
In collaboration with the SEC and the North American Securities Administrators Association, FINRA recently highlighted the risks associated with self-directed individual retirement accounts investing in crypto assets. Additionally, FINRA included crypto asset developments in its 2024 Regulatory and Examination Priorities Report, following the SEC’s guidelines in evaluating firm proposals regarding crypto asset securities.
