The Financial Industry Regulatory Authority (FINRA), the US self-regulatory body, has launched a review of the company’s retail communications regarding the crypto products and services it offers.
The regulatory body, in an official notice, announcement that it launch a targeted review of businesses on how they handled retail communications between July 1 and the end of September. The move to review crypto-related retail communications comes in the wake of the collapse of crypto exchange FTX.
Any written message (including electronic) issued or made available to more than 25 retail investors within a 30-day period is called a “retail communication” according to FINRA. This also applies to video, social media, mobile apps and websites in addition to writing communications.
In its Notice of Review, FINRA asked firms to provide additional information for each individual communication, such as the date it was first made public, whether it was filed with the regulatory department of FINRA publicity, if a company official has approved the communication and identified the crypto goods or services mentioned in the communication.
In addition to relevant compliance rules or documents, FINRA has asked firms to submit written oversight procedures for the “review, approval, record keeping and dissemination” of communications. It also requested information on any contracts with affiliates regarding the production or distribution of the messages, as well as any knowledge those affiliates might have regarding the target audience.
The investigation began on November 14 with the aim of determining whether any of the retail crypto products or services were being falsely advertised. During the height of the crypto bull run, crypto ads became the flavor of many brands and celebrities. Crypto Ads Dominated the 2022 Super Bowl moreover, FTX being one of the most talked about commercials at the time.
The flood of advertisements became a big concern for regulators given that the majority of these advertisements failed to adhere to any advertising standards and often hid the risks associated with crypto investments while glorifying high returns.
Many celebrities like Tom Brady, Larry David and Steph Curry, who were brand ambassadors for crypto exchange FTX, are facing a class action lawsuit. The lawsuit alleged that celebrities advertised FTX’s fraudulent scheme, designed to take advantage of unsuspecting investors across the country.
At the beginning of the year, the authorities of UK, Singapore and Spain tightened requirements around crypto firms’ marketing messages and client recruiting practices. Many other countries and global brands have also Restrictions on Crypto Ads amid market turmoil.