FINRA announced a targeted examination of member firms that are engaged in retail communications about crypto asset products and services. FINRA is requiring members to produce any communications that were distributed by the member firm or its affiliates on its behalf, which refer to, relate to, or concern a crypto asset or service involving the transaction or holding of a crypto asset.
As part of the announced sweep, FINRA distinguished that a “crypto asset” is defined as a security not registered under the Securities Act of 1933 and transferred through the system of a registered clearing agency. Except for this exclusion for registered securities, the definition of Crypto Asset includes all assets that are issued or transferred using distributed ledger or blockchain technology, including but not limited to virtual currencies, coins, and tokens.
As part of their response to the sweep, members are required to provide a numbered tabular list identifying each communication – which included communication via writing, video, social media, mobile application, and websites – provided during the period of July 1, 2022 through Sept. 30, 2022.
The tabular list must:
- Include the date the communication was first made available to the public.
- Identify whether the communication was filed with FINRA’s advertising regulation department. If it was filed, include the FINRA advertising regulation reference number.
- Indicate whether each communication provided was approved by a registered principal of the firm. If so, the date of approval and separate records of such approval must also be provided.
- Identify each crypto asset and/or service involving the transaction or holding of a crypto asset that the communication refers to, relates to, or concerns.
The exam also requires the members to provide any contracts or written agreements between them and any affiliate concerning the member firm’s creation or dissemination of retail communications on behalf of the affiliate or services offered by the affiliate and the affiliates use of member firm customer information to determine who receives retail communications.