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FINRA Wants to Hear From Firms BEFORE They Go Crypto

In 2018 the Financial Industry Regulatory Authority (FINRA) undertook efforts to have member firms contact FINRA before engaging in activities involving digital assets by issuing Regulatory Notice 18-20. That approach led to many discussions between FINRA staff and member firms, and FINRA found that process useful to help it become aware of developing practices and concerns. Now, a new Regulatory Notice 19-24 has been issued to reaffirm the standing request for member firms to consult with FINRA in advance of commencing new activities in the crypto space.  In addition, any firm that is seeking authority through a continuing membership application (CMA) to expand its operations into such an area also is directed to advise the firm’s Regulatory Coordinator.

The issuance of this new regulatory notice reaffirming the need for advance consultation makes clear the continuing interest that FINRA has regarding this area of growing consequence. The Notice also identifies key members of the Office of the General Counsel who can be contacted to initiate inquiries and discussions.

Finally, though not exhaustive, the new Notice includes a list of more than a dozen examples of activities that would be within the scope of the consultation requirement, including:

  • purchases, sales or executions of transactions in digital assets or in a pooled fund investing in digital assets;

  • creation of, management of, or provision of advisory services for, a pooled fund related to digital assets;

  • participation in an initial or secondary offering of digital assets;

  • creation or management of a platform for the secondary trading of digital assets, or custody or similar arrangement of digital assets;

  • using distributed ledger technology or any other use of blockchain technology;

  • mining of cryptocurrencies.

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About this Author

Steven Feldstein, Greenberg Traurig Law Firm, Philadelphia, Corporate and Finance Law Attorney

Steven M. Felsenstein is an attorney in the Investment Regulation Practice and Co-Chair of the Financial Regulatory and Compliance Practice and focuses his practice on serving clients involved in financial services industries. He advises investment companies registered under the Investment Company Act of 1940, investment advisers registered under the Investment Advisers Act, and other administrators and service providers involved in the industry. Steven also represents broker-dealers and transfer agents registered under the Securities Exchange Act of 1934, and issuers of...