The Financial Industry Regulatory Authority (FINRA) has instructed all firms involved in selling securities and related services to the public in the U.S. to disclose their activities “related to digital assets, such as cryptocurrencies and other virtual coins and tokens”, as the recently issued notice reads.
Though not a part of U.S. government, FINRA is authorized by the Congress to protect American investors as a regulatory body in the field of brokerage.
“Every firm and broker that sells securities to the public in the United States must be licensed and registered by FINRA,” – they explained in the organization.
This procedure goes in addition to the obligatory registering with the U.S. Securities and Exchange Commission (SEC). As of April 2018, there were 629 112 individual brokers and 3 712 firms registered with FINRA, as the organization’s official website suggests.
In the last week’s 4-page notice the regulator emphasized, that it “is monitoring developments in the digital asset marketplace and is undertaking efforts to ascertain the extent of FINRA member involvement related to digital assets”. FINRA also encouraged all firms “to promptly notify FINRA if it, or its associated persons or affiliates, currently engages, or intends to engage, in any activities related to digital assets, such as cryptocurrencies and other virtual coins and tokens”.
Earlier this year, the head of FINRA Robert Cook stressed the importance of regulatory attention to cryptocurrencies and ICOs in the Annual Regulatory and Examination Priority Letter.
“FINRA will closely monitor developments in this area, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs. Where such assets are securities or where an ICO involves the offer and sale of securities, FINRA may review the mechanisms…firms have put in place to ensure compliance with relevant federal securities laws and regulations and FINRA rules,” – he wrote.
Previously, the Authority issued a notice warning investors of pump-and-dump schemes. It advised them to “be cautious when considering the purchase of shares of companies that tout the potential of high returns associated with cryptocurrency-related activities without the business fundamentals and transparent financial reporting to back up such claims.”