The Financial Industry Regulatory Authority (FINRA), the US self-regulatory organization, has launched an examination of the company’s retail communications regarding the cryptocurrency products and services they offer.
The regulatory body, in an official statement, announced that it is launching a specific examination of companies on the way they handled retail communications between July 1 and the end of September. The decision to examine cryptocurrency-related retail communications comes after the collapse of the cryptocurrency exchange; FTX.
Any written message (including electronic messages) that is issued to or made available to more than 25 retail investors in a 30-day period is called a “retail communication” under FINRA. It also applies to videos, social networks, mobile applications and websites, in addition to written communications.
In its notice of review, FINRA asked companies to provide additional information for each individual communication, such as the date it was first made public, whether it was filed with FINRA’s department of advertising regulation, whether a director of the company approved the communication and the identification of the crypto assets or services mentioned in said communication.
In addition to any relevant compliance standards or materials, FINRA has requested that companies submit written oversight procedures for the “review, approval, record-keeping, and dissemination” of communications. You have also requested information about any contracts made with the affiliates for the production or distribution of the messages, as well as any knowledge that these affiliates may have about the target audience.
The investigation began on November 14 with the aim of investigating whether any of the retail cryptocurrency products or services promoted false information. At the height of the cryptocurrency bull run, ads became the go-to method for many brands and celebrities. Cryptocurrency ads also dominated Super Bowl 2022, with FTX being one of the most talked about ads at the time.
The flood of ads became a major concern for regulators, as most of them did not meet any advertising standards and often concealed the risks associated with cryptocurrency investments while glorifying high returns.
Many celebrities like Tom Brady, Larry David and Steph Curry, who were former FTX brand ambassadors, are facing a class action lawsuit. The lawsuit alleges that celebrities promoted FTX’s fraudulent scheme that was designed to take advantage of uninformed investors across the country.
Earlier this year, authorities in the UK, Singapore and Spain tightened requirements around cryptocurrency companies’ marketing messages and customer engagement practices. Many other countries and global brands have also placed restrictions on cryptocurrency advertisements amid market turmoil.
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