Potentially in connection with the recent events rocking the crypto industry, FINRA is conducting a new sweep on “Crypto Asset Communications” by broker-dealers. If they haven’t already received the request, broker-dealers with crypto-related affiliates likely will be contacted. Notably, this is the first announced sweep that FINRA has issued in over a year. This Crypto Asset sweep is not limited to communications about crypto assets that are “securities,” and it requests recent crypto asset communications over a relatively short time period (July 2022 through September 2022).
The sweep also focuses on reviewing broker-dealer practices and supervisory processes around retail communications by broker-dealers (whether sent by the firm or by an affiliate on its behalf) broadly about crypto assets and related services. We expect FINRA will scrutinize the following:
- procedures and factors for classifying whether a crypto asset communication is a “retail communication” subject to Rule 2210;
- the role of registered principals in the review process (particularly if wearing dual hats between the broker-dealer and a crypto affiliate);
- the application of Rule 2210 content standards when a retail communication involves crypto; and
- the broker-dealer’s role in the creation and dissemination of retail communications on behalf of its affiliate, and the affiliate’s use of customer information to distribute crypto-related communications.
Some of these considerations likely also will impact how firms determine the communications that should be produced as part of the production in response to the sweep. If your firm receives this sweep and find yourself with questions, we are happy to assist.
