FINRA’s Targeted Probe
The Financial Industry Regulatory Authority, otherwise known as FINRA (we promise they’re not just a bunch of regulators taking coffee breaks), has decided to take a closer look at how firms have been communicating with happy-go-lucky retail investors about their crypto wares. This comes fresh off the heels of the infamous FTX crypto exchange collapse, because if there’s one thing that gets authorities buzzing, it’s visible chaos!
What Counts as Retail Communication?
Now, you might be wondering, “What the heck is retail communication?” Fear not, curious reader! According to our friends at FINRA, if your written (or electronic) message is zipping through cyberspace to more than 25 retail investors in just 30 days, congratulations—it’s officially classified as retail communication! This includes, but is not limited to, social media chirps, mobile app notifications, and even the most gripping of videos. Because who doesn’t want to watch a crypto ad while eating their breakfast?
What FINRA Wants to Know
In their examination notice, FINRA has rolled out a wishlist for firms. They want details on every little communication, like the first publication date (because timing is everything), whether it got a stamp of approval from a firm principal, and of course, which crypto assets or services were going all out in the spotlight. Talk about a backstage pass!
Expectations for Firms
Firms are also expected to provide:
- Written supervisory procedures for the approval of messages.
- Record-keeping practices—yes, even for that embarrassing typo you made in a tweet!
- Information about affiliate partnerships that helped produce these messages, plus what those affiliates know about the audience. Knowledge is power, folks!
Timing is Everything
The inquiry kicked off on November 14, and FINRA has set its sights on uncovering any false advertising associated with retail crypto products. Given that crypto ads flooded the airwaves during the 2022 Super Bowl—FTX’s spots were practically impossible to miss—regulators are eyeing these communications like a hawk. Those ads might have caused a spike in interest, but they also masked some nasty risks lurking in the shadows.
The Celebrity Factor
And let’s not forget about those celebrity endorsements! Big names like Tom Brady, Larry David, and Steph Curry were caught up in the allure of crypto ads, and now they’re facing a class-action lawsuit, accused of peddling a fraudulent scheme that preyed on unsuspecting investors. Yikes! Talk about a lesson in choice of endorsements.
Global Regulatory Waves
As if that isn’t enough, the crypto marketing scene has faced tightening regulations around the globe, from the UK to Singapore to Spain. Countries are stepping up to ensure that marketing practices don’t just turn a blind eye to the risks—because with great power (and ads) comes great responsibility. Who knew the crypto world would be a cradle of such drama and regulation?
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