The US Financial Industry Regulatory Authority is requesting that all its member firms notify the regulator if they engage in any activity related to digital assets. This is an ongoing initiative by the regulator to ascertain the members’ involvement in the digital assets marketplace and covers the firms, their staff, and their affiliates. Making the announcement in a regulatory notice, FINRA requested that its members report any changes in their crypto involvement promptly in the future. The self-regulatory organization has been monitoring developments in the digital assets marketplace for some time now, and its efforts are geared toward protecting investors from the fraudsters in the market.
Maintaining Order in the Marketplace
The notice reminded the members that they have an obligation to adhere to the existing federal and state rules, including those of the SEC and FINRA, if they engage in any crypto-related activity. This is crucial, as cases of fraud and other securities laws violations have increased in this industry. FINRA also reiterated its “keen interest in remaining abreast of the extent of member involvement in this space.”
FINRA had requested that its members disclose their crypto involvement earlier in the year, and the notice was meant to supplement those efforts. Activities that the regulator requires its members to disclose include purchases and sales of digital assets, purchases of derivatives tied to digital assets, participation in ICOs, involvement in the creation or management of a crypto exchange, and the acceptance of digital assets as payment from customers. Members who participate in the creation and management of pooled funds that invest in digital assets will also be required to disclose their activities to the regulator, as will those who engage in the mining of cryptos.
The members will be required to notify their Regulatory Coordinator in writing and via email of any involvement in digital assets if it hasn’t done so already by July 31, 2019. Any future change to a member’s standing must also be reported promptly.
In May, FINRA issued a risk control assessment survey to its members that required them to disclose any activity in the digital assets marketplace by June 22. Used to assess the risks associated with its members’ activities, the RCA was specific to each company.
Established in 2007 to enforce regulations and arbitrate the brokerage and exchange markets, FINRA has been at the forefront of ensuring that the financial services industry adheres to the rule of law. As such, the ever-growing digital assets marketplace has been of great interest to the organization as more of its members engage in crypto-related activities. While it falls under the SEC’s jurisdiction, FINRA has a lot of influence and its opinion of the crypto market could go a long way in determining how the SEC ultimately regulates the market.
FINRA has featured prominently in the crypto industry in recent months as many firms in the industry have sought to become compliant with regulations. Uphold, Circle and Coinbase have all initiated efforts to become broker-dealers and to offer alternative trading systems, moves that must be approved by FINRA. If their plans are approved, these firms will fall under FINRA’s jurisdiction and will be required to adhere to its policies.