The U.S. Financial Industry Regulatory Authority Inc. (FINRA) has issued a guidance note revealing that nearly 400 brokerage firms in the U.S. are involved in the crypto sector in some capacity. This includes firms with active crypto businesses, those planning to launch crypto ventures, and firms partnering or affiliating with crypto entities. Additionally, firms that have representatives engaging in outside business activities or private securities transactions involving cryptoassets are included in this count.
Key Points from FINRA’s Guidance:
– Scope of Involvement: The firms’ crypto activities range from handling private placements, operating trading platforms, to providing custody services for cryptoassets.
– Indirect Involvement: Much of the crypto activities are conducted indirectly through firms’ affiliates or parent companies rather than directly by the brokerage firms themselves.
– Regulatory Jurisdiction: FINRA clarified that while it has jurisdiction over its member firms and associated individuals, it does not have authority over affiliates or parent companies not registered with FINRA.
– Compliance with Laws and Rules: Member firms and representatives dealing in cryptoassets classified as securities must adhere to existing securities laws and FINRA regulations. Certain FINRA rules also apply to cryptoassets that are not classified as securities.
– Challenges and Violations: FINRA identified challenges among member firms in complying with supervisory and marketing rules, including potential violations related to due diligence, misrepresentation of investor protections, anti-money laundering, trading rules, and record-keeping.
– Market Abuse Concerns: The regulator has flagged potential market abuses, such as pump-and-dump schemes, exploiting investor interest in cryptoassets and blockchain technology.
– Survey and Analysis: The guidance is based on a survey of 600 firms and ongoing supervisory activities, aiming to better understand the industry’s exposure to crypto-related stress events.
Greg Ruppert, FINRA’s executive vice president and head of member supervision, emphasized that as the crypto landscape evolves, FINRA remains focused on how member firms engage in crypto activities and how the regulator can adapt to protect investors and markets effectively while supporting its member firms.
Source: unvestmentexecutive.com
