The Financial Industry Regulatory Authority (FINRA), the self-regulatory organization that oversees securities broker-dealers in the United States, has included a section on crypto assets in its 2024 Annual Regulatory Oversight Report for the first time. This report is a tool that member firms can use to inform the development and operation of their compliance programs. The crypto section is aimed at firms that are currently involved in crypto-related activities or plan to be.
FINRA’s membership application program approves firms to act as an agency in private placements, operate an alternative trading system for crypto asset securities, and provide custody services. The report states, “FINRA’s Membership Application Program (MAP) follows the SEC’s guidance in assessing a firm’s proposed crypto asset securities business line under applicable rules, such as the SEC’s financial responsibility rules and customer protection rule.” The organization also requests that its members inform it of activities with non-security crypto assets, as well as associated persons’ crypto-related outside business activities, private securities transactions, and crypto mining operations.
The report provides a comprehensive checklist for SEC compliance, determining whether a crypto asset is a security or if it is the subject of a registration statement, cybersecurity, and Anti-Money Laundering. Retail communications were highlighted because, “Crypto asset-related retail communications reviewed by FINRA’s Advertising Regulation Department have had a non-compliance rate that is significantly higher than that of other products.” Separate checklists for “surveillance themes” and due diligence are also included.
However, FINRA could face repercussions from a Supreme Court decision on the SEC’s use of in-house judges, which is expected this year. FINRA also uses in-house judges to decide cases involving members, a practice that was challenged in 2023. The Court of Appeals for the District of Columbia Circuit ruled against FINRA in that challenge in July.
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| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | None |
| Companies | Securities and Exchange Commission (SEC), Court of Appeals for the District of Columbia Circuit, Financial Industry Regulatory Authority (FINRA) |
| Currencies | None |
| Securities | None |
