All Things FinReg


In its continued efforts to learn what broker-dealers and their employees are doing in the digital asset space, FINRA has effectively reissued a regulatory notice requesting that broker-dealers keep FINRA apprised of their digital asset activities.

 Last July, FINRA issued Regulatory Notice 18-20 where it requested that broker-dealers notify their regulatory coordinators about their and their registered representatives’ digital asset activities. Although not an exhaustive list, some activities FINRA wants information about include the following:

  • The purchase, sale, or execution of transactions in digital assets
  • The creation or management of pooled digital asset investments
  • The purchase, sale, or execution of any futures or options tied to digital assets
  • Participation in an initial or secondary offering of digital assets, e.g., an initial coin offering (ICO), including the creation or management of a platform for the secondary trading of digital assets
  • Accepting cryptocurrencies and other virtual coins and tokens for transactions
  • Cryptocurrency mining
  • The use of blockchain technology

Under the reissued regulatory notice, broker-dealers should continue reporting digital asset activities until July 31, 2020. As FINRA explained, it is still analyzing the varied issues surrounding digital assets and cryptocurrencies, and is gathering information on the firms engaged in these enterprises, the breadth of these firms’ activities, and whether these firms’ employees are also involved in digital assets activities. A firm that has already submitted a continuing membership application (CMA) related to its involvement in digital asset activities does not need to submit a new notice unless a change has occurred.

This reissued regulatory notice, coupled with the recent joint statement issued by FINRA and the staff of the US Securities and Exchange Commission, as explained in our recent LawFlash, suggests that securities regulators are still coming to terms with digital assets and, more importantly, building a knowledge base for how to regulate these activities.

While FINRA has oversight of only broker-dealers and their employees, FINRA’s knowledge includes collecting information on digital asset activities by broker-dealer employees that may not necessarily involve a broker-dealer. In this regard, while FINRA is in its formative process in understanding the digital asset space, the information it collects should help FINRA come of age.