The Financial Industry Regulatory Authority (FINRA) in November 2022 released a targeted exam letter pertaining to communications for crypto products and services. The relevant period for this exam is July 1, 2022, to Sept. 30, 2022, unless otherwise noted. FINRA defines “crypto asset” as assets “issued or transferred using distributed ledger or blockchain technology.” This technology is to include “virtual currencies,” “coins,” and “tokens.” The letter acknowledges that crypto potentially meets the definition of a security under current federal securities laws but notes that under this exam letter, the term “crypto asset” does not include securities registered under the Securities Act and transferred through registered clearing agencies. Further, FINRA defines “retail communications” under FINRA Rule 2210(a)(5) as “any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period.” FINRA intends for “written communication” to also include video, social media, mobile applications, and websites.

Required Information

Under this new targeted exam letter, broker/dealers (BDs) are expected to provide the following information for the relevant period noted above:

  1. All retail communications previously distributed or made available by the firm or affiliates referring/relating to or concerning crypto assets or related services
  2. A numbered tabular list that identifies all communications from (1). The list should include:

    – The date the communication was first publicly available – Whether the BD filed the communication with FINRA’s Advertising Regulation Department, and if so, the associated reference number – Whether a registered principal of the BD approved all communications identified in (1), and if so, the approval date • Records of the approvals should be provided separately from the tabular list – Identify each crypto asset and/or service involving the transaction or holding of crypto that communications in (1) refers/relates to, or concerns
  3. The firm’s written supervisory procedures detailing the review, approval, recordkeeping, and dissemination of related communications in effect
  4. All crypto communications compliance policies, manuals, training materials, compliance bulletins, and any other written guidance in effect
  5. Any contracts or other written agreements between the BD and any affiliate pertaining to:

– The firm’s creation/dissemination of crypto communications on behalf of the affiliate or affiliate-offered services; and

– The affiliate’s use of BD customer information to determine who will receive crypto communications