FINRA Finds 70% of Crypto Communications Violate Public Communication Guidelines
Summary:
The Financial Industry Regulatory Authority (FINRA) has reported that nearly 70% of crypto-related communications broke public communication guidelines, with improper claims and exaggerations being most prevalent. This comes after reviewing over 500 crypto-centric retail communications. The regulator is working on educating and assisting crypto firms with potential substantive violations and ensuring that, while communicating, firms explicitly explain risks and attributes of crypto-assets.
The Financial Industry Regulatory Authority (FINRA) has unveiled data showing approximately 70% of crypto-related outreach from a recent study contained improper claims, including exaggerations and misrepresentation or broke regulations set about public exchange communication. The data was announced in a report distributed on January 23, revealing that FINRA had scrutinized over 500 crypto-centric retail communications initiated since November 2022. The authority highlighted potential substantive violations of public trading guidelines in above 70% of evaluated communications.
This development follows the increasing popularity and interest in digital assets, thus raising the potential harm that problematic communication can induce, as commented by Ira Gluck, the senior director at FINRA. He emphasized that whenever evaluating an investment or service related to crypto-assets, communication ought to explicitly explain its risks and attributes.
Crypto-based communication spans across multiple platforms, from podcasts to ad placements during the Super Bowl. Fraudulent claims, misleading suggestions about federal securities law protections pertaining to digital assets, maybe amongst these possible violations. Giving further context, FINRA provided participating crypto firms with questions for reviewing their public communications.
The review was initiated after pocketing lessons from the collapse of FTX, a crypto exchange, in November 2022. Prior to its bankruptcy, FTX was renowned for its influential marketing tactics, including celebrity recruitment, venue sponsorships, and multiple media appearances by its former CEO, Sam Bankman-Fried.
As a non-governmental regulatory body, FINRA is sanctioned by the U.S. Congress to supervise areas concerning investor protection. The body, in association with the Securities and Exchange Commission, has approved broker-dealer licensure for crypto firms and penalized others for non-compliance with set guidelines.
Published At
1/23/2024 9:40:19 PM
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