FINRA Reminds Members: You Must Report Digital Asset Activity
Do you work in the investment industry, and have an interest in digital assets? The U.S. Financial Industry Regulatory Authority (FINRA) has reminded its members they must continue to notify the organization if they or any of their associated personnel engage in digital asset-related activities.
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FINRA Updates 2018 Reporting Advisory
FINRA issued guidelines in 2018 requiring its members to report any current or planned digital asset activities to their regulatory coordinators up to July 2018. The latest communique issued July 18th, reminded members FINRA intends this to be an ongoing process.
It has advised member firms to notify of any such activity (or planned activity) up to July 2020. Those who have already done so do not need to take any further action unless there’s been a change.
Its definition of “activity” covers trading and/or advisory services related to digital assets, as well as cryptocurrency mining. Trading would include any activity that involves the purchase, trade or custody of the assets whether directly or otherwise; while advisory services would include forming a pooled fund, soliciting or recommending digital asset orders, or even facilitating such activities.
The regulation covers any digital assets whether they be cryptocurrencies, tokens, digital securities, or any other asset using distributed ledger or blockchain technology. FINRA stressed that this is regardless of whether an asset meets the definition of a “security” or not.
Regulatory Authority Has Taken Action in the Past
FINRA has taken action against members who failed to report such activities in the past. In April 2018 it fined Arthur Breitman, co-founder of Tezos, $20,000 USD for not disclosing his work on the Tezos project while he was a Morgan Stanley employee in 2014-15.
Breitman was also banned from “associating with broker-dealers” for two years.
Of some note: FINRA is not a government agency but a not-for-profit private organization authorized by Congress to protect U.S. investors and market integrity by regulating broker-dealers. It does have the power to write and enforce investment regulations by fining, suspending or banning brokers who violate the rules.
Most firms or individual brokers that deal in equities, (corporate) bonds, securities futures and options must be FINRA members to do business in the U.S. It is classified as a self-regulatory organization (SRO) and is the largest of its kind, with over 4,200 member firms and 629,000 registered securities representatives.
Do regulations like this make the digital asset world safer for investors? Tell us what you think in the comments, or share and discuss on social media.
Images via Pixabay, FINRA