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FINRA Announces Targeted Exam on Member’s Crypto Communications

FINRA is requesting 20 firms provide all retail communications that were distributed or made available by the firm or its affiliate on its behalf from July through September.

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In the wake of the collapse of cryptocurrency exchange FTX last week, the Financial Industry Regulatory Authority announced it is conducting a targeted exam of firm practices regarding retail communications concerning crypto asset products and services.

FINRA is requesting approximately 20 firms provide all retail communications regarding crypto assets that were distributed or made available by the firm or its affiliates on its behalf from July through September 2022.

“[Considering the growth of the crypto market] the potential harm caused by misrepresentations or exaggerated claims in retail communications that promote or recommend a crypto asset or a service involving the transaction or holding of a crypto asset has also increased,” said Ray Pellecchia, FINRA spokesman.

Communications include a crypto asset or a service involving the transaction or holding of crypto.

“This risk is not hypothetical. The limited number of crypto asset related communications filed with FINRA by broker-dealer firms fail to comply with applicable standards at a significantly higher rate than communications for other products,” Pellechia said.

The organization requests that the firms identify whether or not the communication was filed with FINRA’s Advertising Regulation Department, whether or not each communication provided was approved by a registered principal of the firm and to identify each crypto asset and service involving the transaction or holding of a crypto asset that the communication refers to.

The organization also requests any written guidance and contracts made by the firms regarding crypto.

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