The Financial Industry Regulatory Authority (FINRA), a self-regulatory body overseeing securities broker-dealers in the US, has included a section on crypto assets in its 2024 Annual Regulatory Oversight Report for the first time. The authority advises users to exercise caution when engaging in crypto asset-related activities and urges firms to address the regulatory challenges and risks associated with the industry.
FINRA defines crypto or digital assets as “assets issued or transferred using distributed ledger or blockchain technology.” The report, spanning 90 pages, details that member firms seeking to engage in crypto asset-related activity should identify and address the relevant regulatory and compliance challenges and risks. This includes reviewing and evaluating their supervisory programs and controls, and compliance policies and procedures, in areas such as cybersecurity, AML compliance, communications with customers, manipulative trading, performing due diligence on crypto asset private placements and supervising their associated persons’ involvement in crypto asset-related outside business activities (OBAs) and private securities transactions (PSTs).
The report also highlights the rising involvement of malicious actors in the space, exploiting assets with low market caps. Despite a 51% decline in losses due to crypto hacks in 2023 compared to 2022, security breaches remain a significant concern for the industry.
FINRA falls under the US Securities and Exchange Commission’s (SEC) purview and describes its annual oversight report as a tool that member firms can use to help inform the development and operation of their compliance programs. The “Crypto Asset Developments and Advertised Volume” section is aimed at firms currently engaged in crypto asset-related activities or those intending to do so. Membership in FINRA’s program allows a firm to serve as an agency in private (non-public) placements, operate alternative trading systems for crypto asset securities, and provide custody services.
The report details FINRA’s Membership Application Program (MAP), which follows the SEC’s guidance in assessing a firm’s proposed crypto asset securities business line under applicable rules. FINRA’s MAP has approved firms to engage in crypto asset securities business, including serving as a placement agent in the private placement of crypto asset securities, operating an Alternative Trading System (ATS) for crypto asset securities, and providing custodial services for crypto asset securities.
Firms approved to engage in crypto activities are asked to notify FINRA when they or their affiliates engage or plan to engage in crypto asset-related activities, including activities related to crypto assets that are not securities. The report also includes a substantial checklist for SEC compliance.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | None |
| Companies | US Securities and Exchange Commission, Financial Industry Regulatory Authority |
| Currencies | None |
| Securities | None |
