Potentially in connection with the recent events rocking the crypto industry, FINRA is conducting a new sweep on “Crypto Asset Communications” by broker-dealers.  If they haven’t already received the request, broker-dealers with crypto-related affiliates likely will be contacted.  Notably, this is the first announced sweep that FINRA has issued in over a year. This Crypto Asset sweep is not limited to communications about crypto assets that are “securities,” and it requests recent crypto asset communications over a relatively short time period (July 2022 through September 2022). 

The sweep also focuses on reviewing broker-dealer practices and supervisory processes around retail communications by broker-dealers (whether sent by the firm or by an affiliate on its behalf) broadly about crypto assets and related services.  We expect FINRA will scrutinize the following:

  • procedures and factors for classifying whether a crypto asset communication is a “retail communication” subject to Rule 2210;
  • the role of registered principals in the review process (particularly if wearing dual hats between the broker-dealer and a crypto affiliate);
  • the application of Rule 2210 content standards when a retail communication involves crypto; and
  • the broker-dealer’s role in the creation and dissemination of retail communications on behalf of its affiliate, and the affiliate’s use of customer information to distribute crypto-related communications. 

Some of these considerations likely also will impact how firms determine the communications that should be produced as part of the production in response to the sweep.  If your firm receives this sweep and find yourself with questions, we are happy to assist.

Author

Amy serves as the Co-chair of Baker McKenzie's North American Financial Regulation and Enforcement Practice, which provides our clients with a full range of regulatory advice and enforcement counseling. Amy also serves on the steering committees of the Firm's Global Financial Services Regulatory and Global Financial Institutions Groups. Previously, Amy has served as chief litigation counsel at the US Securities and Exchange Commission's (SEC) Philadelphia regional office and managed a team of lawyers overseeing a wide variety of enforcement matters.

Author

Jennifer serves as the Co-chair of Baker McKenzie's Financial Regulation and Enforcement Practice in North America. Jen is an experienced investment management lawyer with particular focus on investment adviser regulation and the convergence of investment advisory and brokerage services. She regularly represents clients before the US Securities and Exchange Commission (SEC), both in seeking interpretative guidance and in managing examination and enforcement matters. Jen is a leading practitioner in digital investment advice and the use of FinTech in the asset management industry.

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Jennifer Connors is a partner in Baker McKenzie's Financial Regulation and Enforcement Practice Group. She represents broker-dealers, investment advisers, alternative trading systems (ATSs), private fund managers, financial technology (FinTech) companies and other market participants on securities law and market regulation matters. Jennifer has more than 20 years of experience in legal and compliance roles at both global financial services firms and innovative FinTech companies as both a general counsel and a chief compliance officer. In these roles, she developed comprehensive written supervisory procedures (WSPs) and training programs for brokerage personnel, and served as a key liaison with financial industry regulators. In addition, she has drafted and negotiated vendor agreements, technology license agreements and electronic-access and trading agreements within the context of a FinTech startup.

Author

Gavin Meyers is a senior associate in Baker McKenzie's Financial Regulation and Enforcement Practice Group in North America. Gavin is an experienced regulatory lawyer advising broker-dealers, investment advisers, FinTech and cryptocurrency firms on regulatory, enforcement and compliance matters involving federal and state securities laws, FINRA rules and money transmission regulations. Prior to joining the Firm, Gavin was Senior Legal Counsel at a start-up FinTech broker-dealer and crypto-trading platform where he managed the firm's US money transmitter licensing (MTL) applications and advised the firm’s various entities on broker-dealer and crypto-related regulatory obligations and strategic business decisions. Gavin also previously was Assistant General Counsel at a global financial services firm where he provided practical guidance to business, supervision, and compliance groups regarding securities regulations and FINRA rules, including implementation of the Securities and Exchange Commission (SEC)'s Regulation Best Interest. Gavin also served as Senior Counsel in the Office of General Counsel at the Financial Industry Regulatory Authority (FINRA) where he was responsible for providing guidance on complex regulatory initiatives and FINRA rules and developing and drafting regulatory guidance and rule filings for submission to SEC. He also served in FINRA's Office of Fraud Detection and Market Intelligence (OFDMI) where he conducted regulatory investigations involving insider trading.