Yesterday, the Financial Industry Regulatory Authority (FINRA) issued a Regulatory Notice 19-24 to its member firms. The objective of this notice is to encourage the member firms to inform the Regulatory Authority about any engagement or intention of engagement with the activities related to the digital asset.
It is not the first time that the Regulatory Authority took the initiative to engage with its member firms. For instance, last year too, the FINRA issued a Regulatory Notice 18-20. Through this notice, the Regulatory Authority encouraged its member firms to keep the respective Regulatory Coordinators updated about any engagement or intention of engagement with the activities related to the digital asset. As per this notice, clarity was requested based on the member firm level, affiliates, or any other associated people. The concerned firms or people were to inform about the digital assets that are non-securities as well. The deadline to submit the relevant information is until July 31st, 2019.
The Regulatory Authority is grateful for the cooperation it has got since the past year and is expecting the same to be continued. The deadline for the current Regulatory Notice is July 31, 2020. Moreover, if any of the member firms or the affiliates or any other associated people have any queries, the Regulatory Authority has provided contact details of the Vice President & Associate General Counsel, the Associate General Counsel, and the Assistant General Counsel of the FINRA to get support from.
So what are the types of activities that are to be informed?
FINRA is expecting its member firms to update the Regulatory Authority about any activity related to the digital asset and about the digital assets that are non-securities as well. Some examples of such activities include-
- Any buying or selling or executions activities that are related to digital assets.
- Any buying or selling or executions activities that are related to digital assets, which are made based on pooled funds.
- Any advisory services that come under the category of ‘creation,’ ‘management’ or ‘provision,’ which are related to the digital assets, are also to be informed to the Regulatory Authority.
- Any buying or selling or executions activities related to futures, options, and other derivatives that are related to digital assets.
- If any member firm, affiliates or any other associated people have participated in an initial or secondary offering of crypto tokens, or security tokens, or any other digital assets.
- FINRA should be updated about any generating or managing of a platform which relates to the secondary trading of digital assets.
- Any custody or any parallel set-up that relates to digital assets.
- If any cryptocurrency has been accepted from the users.
- If there has been any direct or indirect participation in mining.
- Any activities related to ‘recommendation, solicitation or acceptance’ of any crypto or other virtual coins or tokens related activities.
- Any kind of interest or quotations in virtual coins, tokens, or other cryptocurrencies.
- Any support offered for ‘clearance or any settlement services’ that are related to virtual coins, tokens, or other cryptocurrencies.
- If there is any record-keeping of virtual coins, tokens, or other cryptocurrencies with the help of DLT or any other technology including blockchain technology.
The Regulatory Authority has requested the associated member firms, associates and other related people to cooperate with FINRA. On the other hand, FINRA and the U.S. Securities and Exchange Commission (SEC) issued a joint statement recently. This statement was about “broker-dealer custody of digital assets and Notice 19-24 underscores regulators.”