FINRA Fines Firm for Crypto Communications Violations
Commentary by Gage Raju-Salicki
A firm settled FINRA charges for disclosure deficiencies in retail communications concerning crypto assets offered by its affiliate.
According to the AWC, the firm distributed retail communications—including webpages, emails and social media posts—regarding crypto assets offered by its affiliate. FINRA highlighted that the affiliate required customers to maintain brokerage accounts with the firm in order to purchase the crypto assets. FINRA stated that most of the firm's communications failed to clearly disclose that the crypto assets were offered by the affiliate, not by the registered broker-dealer.
FINRA found the content on the firm's website did not clearly state "which entity" was offering crypto assets. FINRA stated that one webpage described the firm as providing "award-winning trading and analysis platforms" and brokerage services for a wide range of products, including cryptocurrencies, without distinguishing between those offered by the firm and by its affiliate. FINRA cited a video posted to social media that promoted the firm as a platform to "buy, sell, and trade" various assets, including "several cryptocurrencies," which FINRA said could have confused investors about the service provider and the applicable regulatory protections. FINRA also found that some of the firm's communications promoted crypto assets offered through the affiliate without providing a description of the risks involved in such investments.
FINRA said the firm's affiliate eventually "ceased offering crypto assets" and the firm stopped distributing retail communications related to those offerings by the affiliate.
FINRA determined the firm violated FINRA Rules 2210 ("Communications with the Public") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure and (ii) an $85,000 fine.
Commentary
This disciplinary action underscores FINRA's focus on clarity and investor protection in crypto marketing. It also reflects broader findings from a January 2024 report related to a FINRA sweep that reviewed over 500 crypto‑related retail communications. In that report, FINRA determined that approximately 70% of the retail communications on crypto assets contained possible violations of Rule 2210, including misleading statements, omissions of material risks and failure to distinguish offerings by affiliates versus broker‑dealers.
Around the same time, the SEC also issued an Order against an on-line trading platform's crypto arm, indicating a similar set of concerns. That case is emblematic of the issue FINRA identified: retail investors were given an impression of regulated product safety while key disclosures were omitted. FINRA's action here should signal to firms that they must continue to carry out compliance, clearly separate regulated from unregulated offerings, and ensure risk disclosures are prominent and meaningful in all promotional communication even as a more innovation-friendly SEC has reduced the number of major enforcement actions.
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A firm settled FINRA charges for disclosure deficiencies in retail communications concerning crypto assets and crypto asset-related services.